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Start PreambleStart Printed Page 43534

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2014 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. In this proposed rule, we describe the proposed changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting (ASCQR) Program, and the Hospital Value-Based Purchasing (VBP) Program.

We are proposing changes to the conditions for coverage (CfCs) for organ procurement organizations (OPOs); revisions to the Quality Improvement Organization (QIO) regulations; changes to the Medicare fee-for-service Electronic Health Record (EHR) Incentive Program; and changes relating to provider reimbursement determinations and appeals.

DATES:

Comment Period: To be assured consideration, comments on all sections of this proposed rule must be received at one of the addresses provided in the ADDRESSES section no later than 5 p.m. EST on September 6, 2013.

ADDRESSES:

In commenting, please refer to file code CMS-1601-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

You may submit comments in one of four ways (no duplicates, please):

1. Electronically. You may (and we encourage you to) submit electronic comments on this regulation to http://www.regulations.gov. Follow the instructions under the “submit a comment” tab.

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal Government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

Marjorie Baldo, (410) 786-4617, for all other issues related to hospital outpatient and ambulatory surgical center payments not previously identified.

End Further InfoEnd PreambleStart Supplemental Information

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to view public comments.

Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publication of the rule, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/​fdsys/​.

1. Proposed Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective April 1, 2013 and July 1, 2013 for Which We Are Soliciting Public Comments in This CY 2014 OPPS/ASC Proposed Rule

2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2014 for Which We Will Solicit Public Comments in the CY 2014 OPPS/ASC Final Rule With Comment Period

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2014

4. Proposed Provisions for Reducing Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals; Contrast Agents; Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure; and Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure

a. Background

b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals

c. Proposed Payment Offset Policy for Contrast Agents

d. Proposed Payment Offset Policy for Products Packaged According to the Proposed Policy To Package Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure and Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure

f. Effects of Proposed Changes to the CfCs for OPOs Relating to the Outcome Measure Requirement for Recertification

g. Effects of Proposed Revisions of the QIO Regulations

h. Effects of Proposed Changes to the Medicare Fee-for-Service EHR Incentive Program

B. Regulatory Flexibility Act (RFA) Analysis

C. Unfunded Mandates Reform Act Analysis

D. Conclusion

XXIV. Federalism Analysis

Regulation Text

I. Summary and Background

A. Executive Summary of This Proposed Rule

1. Purpose

In this proposed rule, we are proposing to update the payment policies and payment rates for services furnished to Medicare beneficiaries in hospital outpatient departments and Ambulatory Surgical Centers (ASCs) beginning January 1, 2014. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the relative payment weights and the conversion factor for services payable under the Outpatient Prospective Payment System (OPPS). Under section 1833(i) of the Act, we annually review and update the ASC payment rates. We describe these and various other statutory authorities in the relevant sections of this proposed rule. In addition, we are proposing to update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting (ASCQR) Program, and the Hospital Value-Based Purchasing (VBP) Program.

We are proposing changes to the conditions for coverage (CfCs) for organ procurement organizations (OPOs); revisions to the Quality Improvement Organization (QIO) regulations; changes to the Medicare fee-for-service Electronic Health Record (EHR) Incentive Program; and changes relating to provider reimbursement determinations and appeals.

2. Summary of the Major Provisions

OPPS Update: For CY 2013, we are proposing to increase the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.8 percent. This proposed increase is based on the proposed hospital inpatient market basket percentage increase of 2.5 percent for inpatient services paid under the hospital inpatient prospective payment system (IPPS), minus the proposed multifactor productivity (MFP) adjustment of 0.4 percentage points, and minus a 0.3 percentage point adjustment required by the Affordable Care Act. Under this proposed rule, we estimate that proposed total payments for CY 2014, including beneficiary cost-sharing, to the almost 4,000 facilities paid under the OPPS (including general Start Printed Page 43540acute care hospitals, children's hospitals, cancer hospitals, and community mental health centers (CMHCs)), will be approximately $50.4 billion, an increase of approximately $4.4 billion compared to CY 2013 payments, or $600 million excluding our estimated changes in enrollment, utilization, and case-mix

We are proposing to continue to implement the statutory 2.0 percentage point reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a reporting factor of 0.980 to the OPPS payments and copayments for all applicable services.

Rural Adjustment: We are proposing to continue the adjustment of 7.1 percent to the OPPS payments to certain rural sole community hospitals (SCHs), including essential access community hospitals (EACHs). This adjustment will apply to all services paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to cost.

Cancer Hospital Payment Adjustment: For CY 2014, we are proposing to continue our policy to provide additional payments to cancer hospitals so that the hospital's payment-to-cost ratio (PCR) with the payment adjustment is equal to the weighted average PCR for the other OPPS hospitals using the most recent submitted or settled cost report data. Based on those data, a target PCR of 0.90 will be used to determine the proposed CY 2014 cancer hospital payment adjustment to be paid at cost report settlement. That is, the proposed payment amount associated with the cancer hospital payment adjustment will be the additional payment needed to result in a PCR equal to 0.90 for each cancer hospital.

Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2014, proposed payment for the acquisition and pharmacy overhead costs of separately payable drugs and biologicals that do not have pass-through status would be set at the statutory default of average sales price (ASP) plus 6 percent.

Packaging Proposals: The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services in the most efficient way by enabling hospitals to manage their resources with maximum flexibility, thereby encouraging long-term cost containment. For 2014, we are proposing to unconditionally package or conditionally package the following items and services and to add them to the list of OPPS packaged items and services in 42 CFR 419.2(b):

(1) Drugs, biologicals, and radiopharmaceuticals that function as supplies in a diagnostic test or procedure;

(2) Drugs and biologicals that function as supplies or devices in a surgical procedure;

(3) Laboratory tests;

(4) Procedures described by add-on codes;

(5) Ancillary services (status indicator “X”);

(6) Diagnostic tests on the bypass list; and

(7) Device removal procedures.

We refer readers to section II.A.3. of this proposed rule for a complete description of our 2014 packaging proposals.

Establishing Comprehensive APCs: In order to improve the accuracy and transparency of our payment for certain device-dependent services, for CY 2014, we are proposing to create 29 comprehensive APCs to prospectively pay for the most costly device-dependent services. We are proposing to define a comprehensive APC as a classification for the provision of a primary service and all adjunct services provided to support the delivery of the primary service. The comprehensive APC would treat all individually reported codes as representing components of the comprehensive service, resulting in a single prospective payment based on the cost of all individually reported codes that represent the delivery of a primary service as well as all adjunct services provided to support that delivery. We are proposing to make a single payment for the comprehensive service based on all charges on the claim, excluding only charges for services that cannot be covered by Medicare Part B or that are not payable under the OPPS.

Payment of Hospital Outpatient Visits: For CY 2014 we are proposing to replace the current five levels of visit codes for each clinic, Type A ED, and Type B ED visits with three new alphanumeric Level II HCPCS codes representing a single level of payment for the three types of visits, respectively. We are proposing to assign the new alphanumeric Level II HCPCS to newly created APCs with CY 2014 OPPS payment rates based on the total mean costs of Level 1 through Level 5 visit codes obtained from CY 2012 OPPS claims data for each visit type.

Proposed OPPS Nonrecurring Policy Changes: We note in this proposed rule that we expect to allow the enforcement instruction for the supervision of outpatient therapeutic services furnished in CAHs and small rural hospitals to expire at the end of CY 2013. In addition, we are proposing to amend the conditions of payment for “incident to” hospital or CAH outpatient services (sometimes referred to as hospital or CAH “therapeutic” services) to require that individuals furnishing these services be in compliance with State law. We are soliciting public comments regarding a potential new claims or other data element that would indicate that the services were furnished in an off-campus provider-based department. Finally, we refer readers to the CY 2014 Medicare Physician Fee Schedule (MPFS) proposed rule (CMS-1600-P) to review Medicare's proposal to apply the therapy caps and related provisions under section 1833(g) of the Act to physical therapy (PT), speech-language pathology (SLP) and occupational therapy (OT) (“therapy”) services that are furnished by a CAH, effective January 1, 2014.

Ambulatory Surgical Center Payment Update: For CY 2014, we are proposing to increase payment rates under the ASC payment system by 0.9 percent. This proposed increase is based on a projected CPI-U update of 1.4 percent minus a multifactor productivity adjustment required by the Affordable Care Act that is projected to be 0.5 percent. Based on this proposed update, we estimate that total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2014 would be approximately $3.980 billion, an increase of approximately $133 million compared to estimated CY 2013 payments.

Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are proposing five quality measures for the CY 2016 and subsequent years payment determinations: four where aggregate data (numerators, denominators, and exclusions) are collected and data submitted via an online Web-based tool located on a CMS Web page and one HAI measure submitted through the CDC's NHSN. We also are proposing to remove two measures and are proposing to codify administrative procedures.

Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the ASCQR Program, we are proposing four quality measures for the CY 2016 and subsequent years payment determinations where data collection would begin in CY 2014. We are proposing to collect aggregate data (numerators, denominators, and exclusions) on all ASC patients for these Start Printed Page 43541four proposed chart-abstracted measures via an online Web-based tool located on a CMS Web page. We also are proposing, for the CY 2016 payment determination and subsequent years' payment determinations, requirements for facility participation, data collection, and submission for claims-based, CMS Web-based, and NHSN measures.

Proposed Revisions to the Quality Improvement Organizations Regulations. We are proposing to update the regulations at 42 CFR parts 475 and 476 based on the recently enacted Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Pub. L. 112-40, Section 261) where by Congress authorized numerous changes to the original legislation and included additional flexibility for the Secretary in the administration of the QIO program. Currently, 42 CFR Part 475 includes definitions and standards governing eligibility and the award of contracts to QIOs. In this proposed rule, we set forth proposals for the partial deletion and revision of the regulations under 42 CFR Parts 475 and 476, which relate to the QIO program, including the following: (1) Replace nomenclature in Part 475 and 476 that has been amended by the TAAEA; (2) revise the existing definition for the term “physician”; (3) add new definitions as necessary to support the new substantive provisions in Subpart C; and (4) replace some of the substantive provisions in Subpart C in their entirety to fully exercise the Secretary's authority for the program and update the contracting requirements to align with contemporary quality improvement.

Proposed Changes to the Medicare Fee-for-Service Electronic Record (EHR) Incentive Program. We are proposing to the regulations to provide a special method for making hospital-based determinations for 2013 only in the cases of those eligible professionals (EPs) who reassign their benefits to Method II CAHs. We have been unable to make EHR payments to these EPs for their CAH II claims, or to take those claims into consideration in making hospital-based determinations because of systems limitations. Adopting our proposed method for 2013 will allow us to begin making payments based on CAH II one year earlier than we would be able to do under current regulations. We also are proposing a minor clarification to the regulations concerning the cost reporting period to be used in determining final EHR payments for hospitals.

3. Summary of Costs and Benefits

In sections XXIII. and XXIV. of this proposed rule, we set forth a detailed analysis of the regulatory and federalism impacts that the proposed changes would have on affected entities and beneficiaries. Key estimated impacts are described below.

a. Impacts of the OPPS Update

(1) Impacts of All Proposed OPPS Changes

Table 39 in section XXIII. of this proposed rule displays the distributional impact all the proposed OPPS changes on various groups of hospitals and CMHCs for CY 2014 compared to all estimated OPPS payments in CY 2013. We estimate that the proposed policies in this proposed rule would result in a 1.8 percent overall increase in OPPS payments to providers. We estimate that the proposed increase in OPPS expenditures, including beneficiary cost-sharing, would be approximately $600 million, not taking into account potential changes in enrollment, utilization, and case-mix. Taking into account estimated spending changes that are attributable to these factors, we estimate an increase of approximately $4.372 billion in OPPS expenditures, including beneficiary cost-sharing, for CY 2014 compared to CY 2013 OPPS expenditures. We estimate that proposed total OPPS payments, including beneficiary cost-sharing, would be $50.4 billion for CY 2014.

We estimated the isolated impact of our proposed OPPS policies on CMHCs because CMHCs are only paid for partial hospitalization services under the OPPS. Continuing the provider-specific structure that we adopted for CY 2011 and basing payment fully on the type of provider furnishing the service, we estimate a 3.8 percent decrease in CY 2014 payments to CMHCs relative to their CY 2013 payments.

(2) Impacts of the Proposed Updated Wage Indices

We estimate no significant impacts related to our proposal to update the wage indices and apply the frontier State wage index. Proposed adjustments to the wage indices other than the frontier State wage adjustment would not significantly affect most hospitals.

(3) Impacts of the Proposed Rural Adjustment and the Cancer Hospital Payment Adjustment

There are no significant impacts of our proposed CY 2014 payment policies for hospitals that are eligible for the rural adjustment or for the cancer hospital payment adjustment. We are not proposing to make any change in policies for determining the rural and cancer hospital payment adjustments, and the proposed adjustment amounts do not significantly impact the budget neutrality adjustments for these proposed policies.

(4) Impacts of the Proposed OPD Fee Schedule Increase Factor

We estimate that, for many hospitals, the application of the proposed OPD fee schedule increase factor of 1.8 percent to the conversion factor for CY 2014 would mitigate the small negative impacts of the budget neutrality adjustments. While most classes of hospitals would receive an increase that is in line with the proposed 1.8 percent overall increase after the update is applied to the budget neutrality adjustments, some hospitals would receive smaller but still generally positive overall increases.

b. Impacts of the Proposed ASC Payment Update

For impact purposes, the surgical procedures on the ASC list of covered procedures are aggregated into surgical specialty groups using CPT and HCPCS code range definitions. The proposed percentage change in estimated total payments by specialty groups under the CY 2014 payment rates compared to estimated CY 2013 payment rates ranges between −12 percent for ancillary items and services and 17 percent for hemic and lymphatic system procedures.

c. Impacts of the Hospital OQR Program

We do not expect our proposed CY 2014 policies to significantly affect the number of hospitals that do not receive a full annual payment update.

d. Impacts of the ASCQR Program

We do not expect our proposed CY 2014 proposed policies to significantly affect the number of ASCs that do not receive a full annual payment update beginning in CY 2015.

e. Impacts for the Proposed QIO Program Changes

We estimate the effects of the proposed QIO Program changes to be consistent with the Congressional Budget Office's 2011 Cost Estimate of the Trade Bill (H.R. 2832) which included a reduction in spending of $330 million over the 2012-2021 period. According to the CBO Estimate the Act and subsequently the proposed regulatory changes “would modify the provisions under which CMS contracts with independent entities called [“]Quality Improvement Organizations [(QIOs)”] in Medicare. QIOs, generally staffed by health care professionals, review medical care, help beneficiaries with complaints about the quality of Start Printed Page 43542care, and implement care improvements. H.R. 2832 would make several changes to the composition and operation of QIOs, and would harmonize QIO contracts with requirements of the Federal Acquisition Regulation. Among those changes are a modification to expand the geographic scope of QIO contracts and a lengthening of the contract period. CBO estimates that those provisions would reduce spending by $330 million over the 2012-2021 period.”

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Social Security Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specific costs. In an effort to ensure that Medicare and its beneficiaries pay appropriately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a prospective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act authorizing implementation of a PPS for hospital outpatient services. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations for the OPPS are located at 42 CFR Parts 410 and 419.

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the OPPS: The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvements and Extension Act under Division B of Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Protection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (These two public laws are collectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 2011; and most recently the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012; and most recently the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013.

Under the OPPS, we pay for hospital outpatient services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to identify and group the services within each APC. The OPPS includes payment for most hospital outpatient services, except those identified in section I.C. of this proposed rule. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS for hospital outpatient services designated by the Secretary (which includes partial hospitalization services furnished by CMHCs), and certain inpatient hospital services that are paid under Part B.

The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a labor-related amount and a nonlabor-related amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.

All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2)(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost (or mean cost, if elected by the Secretary) for an item or service within the same APC group (referred to as the “2 times rule”). In implementing this provision, we generally use the cost of the item or service assigned to an APC group.

For new technology items and services, special payments under the OPPS may be made in one of two ways. Section 1833(t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-through payments,” for at least 2 but not more than 3 years for certain drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that are not eligible for transitional pass-through payments, and for which we lack sufficient clinical information and cost data to appropriately assign them to a clinical APC group, we have established special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is temporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, diagnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized prevention plan services. The Secretary originally exercised the authority granted under the statute to also exclude from the OPPS those services that are paid under fee schedules or other payment systems. Such excluded services include, for example, the professional services of physicians and nonphysician practitioners paid under the MPFS; laboratory services paid at the Clinical Laboratory Fee Schedule (CLFS) rates; services for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that require an inpatient stay that are paid under the hospital IPPS. We set forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22. This proposed rule includes proposals to modify 42 CFR 419.22 and include in the OPPS some of these currently excluded services.

Under § 419.20(b) of the regulations, we specify the types of hospitals and entities that are excluded from payment under the OPPS. These excluded entities include: Maryland hospitals, but Start Printed Page 43543only for services that are paid under a cost containment waiver in accordance with section 1814(b)(3) of the Act; CAHs; hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service (IHS) hospitals.

D. Prior Rulemaking

On April 7, 2000, we published in the Federal Register a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was first implemented for services furnished on or after August 1, 2000. Section 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, not less often than annually, and to revise the groups, relative payment weights, and other adjustments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors.

1. Authority of the Panel

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 106-113, requires that we consult with an external advisory panel of experts to annually review the clinical integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act which gives discretionary authority to the Secretary to convene advisory councils and committees, the Secretary expanded the panel's scope to include the supervision of hospital outpatient therapeutic services in addition to the APC groups and weights. To reflect this new role of the panel, the Secretary changed the panel's name to the Advisory Panel on Hospital Outpatient Payment (the HOP Panel, or the Panel). The Panel is not restricted to using data compiled by CMS, and in conducting its review it may use data collected or developed by organizations outside the Department.

2. Establishment of the Panel

On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, at that time named the APC Panel. This expert panel, which may be composed of up to 19 appropriate representatives of providers (currently employed full-time, not as consultants, in their respective areas of expertise), reviews clinical data and advises CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, the Panel also is charged with advising the Secretary on the appropriate level of supervision for individual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). The current charter specifies, among other requirements, that: the Panel continues to be technical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; has a Designated Federal Official (DFO); and is chaired by a Federal Official designated by the Secretary. The current charter was amended on November 15, 2011 and the Panel was renamed to reflect expanding the Panel's authority to include supervision of hospital outpatient therapeutic services and therefore to add CAHs to its membership.

3. Panel Meetings and Organizational Structure

The Panel has held multiple meetings, with the last meeting taking place on March 11, 2013. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for Panel membership and to announce new members.

The Panel has established an operational structure that, in part, currently includes the use of three subcommittees to facilitate its required review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups and Status Indicator (SI) Assignments.

The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for resolving them. The Visits and Observation Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation services and hospital outpatient visits paid under the OPPS (for example, APC configurations and APC relative payment weights). The Subcommittee for APC Groups and SI Assignments advises the Panel on the following issues: the appropriate SIs to be assigned to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APC placement of HCPCS codes regarding services for which separate payment is made.

Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended that the subcommittees continue at the August 2013 Panel meeting. We accepted this recommendation.

Discussions of the other recommendations made by the Panel at the March 2013 Panel meeting are included in the sections of this final rule that are specific to each recommendation. For discussions of earlier Panel meetings and recommendations, we refer readers to previously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlier in this section, and the FACA database at: http://fido.gov/​facadatabase/​public.asp.

F. Public Comments Received on the CY 2013 OPPS/ASC Final Rule With Comment Period

We received approximately 27 timely pieces of correspondence on the CY 2013 OPPS/ASC final rule with comment period that appeared in the Federal Register on November 15, 2012 (77 FR 68210), some of which contained comments on the interim APC assignments and/or status indicators of HCPCS codes identified with comment indicator “NI” in Addenda B, AA, and BB to that final rule. Summaries of these public comments on topics that were open to comment and our responses to them will be set forth in various sections of the final rule with comment period under the appropriate subject-matter headings.Start Printed Page 43544

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction

a. Database Source and Methodology

Section 1833(t)(9)(A) of the Act requires that the Secretary review not less often than annually and revise the relative payment weights for APCs. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we calculated the relative payment weights that were implemented on August 1, 2000 for each APC group.

For the CY 2014 OPPS, we are proposing to recalibrate the APC relative payment weights for services furnished on or after January 1, 2014, and before January 1, 2015 (CY 2014), using the same basic methodology that we described in the CY 2013 OPPS/ASC final rule with comment period. That is, we are proposing to recalibrate the relative payment weights for each APC based on claims and cost report data for hospital outpatient department (HOPD) services, using the most recent available data to construct a database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment weights for CY 2014, we used approximately 146 million final action claims (claims for which all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2012, and before January 1, 2013. For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this proposed rule on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

Of the approximately 146 million final action claims for services provided in hospital outpatient settings used to calculate the CY 2014 OPPS payment rates for this proposed rule, approximately 117 million claims were the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the approximately 117 million claims, approximately 5 million claims were not for services paid under the OPPS or were excluded as not appropriate for use (for example, erroneous cost-to-charge ratios (CCRs) or no HCPCS codes reported on the claim). From the remaining approximately 112 million claims, we created approximately 82 million single records, of which approximately 34 million were “pseudo” single or “single session” claims (created from approximately 19 million multiple procedure claims using the process we discuss later in this section). Approximately 1 million claims were trimmed out on cost or units in excess of +/− 3 standard deviations from the geometric mean, yielding approximately 82 million single bills for ratesetting. As described in section II.A.2. of this proposed rule, our data development process is designed with the goal of using appropriate cost information in setting the APC relative payment weights. The bypass process is described in section II.A.1.b. of this proposed rule. This section discusses how we develop “pseudo” single procedure claims (as defined below), with the intention of using more appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining information on the claim continues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes.

The proposed APC relative weights and payments for CY 2014 in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) were calculated using claims from CY 2012 that were processed through December 31, 2012. While prior to CY 2013 we historically based the payments on median hospital costs for services in the APC groups, beginning with the CY 2013 OPPS, we established the cost-based relative payment weights for the OPPS using geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2014 OPPS, we are proposing to use this same methodology, basing payments on geometric mean costs. Under this methodology, we select claims for services paid under the OPPS and match these claims to the most recent cost report filed by the individual hospitals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims data and the most recently submitted cost reports to calculate the relative costs underpinning the APC relative payment weights and the CY 2014 payment rates.

b. Proposed Use of Single and Multiple Procedure Claims

For CY 2014, in general, we are proposing to continue to use single procedure claims to set the costs on which the APC relative payment weights are based. We generally use single procedure claims to set the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one unit of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performed on the same date of service.

It is generally desirable to use the data from as many claims as possible to recalibrate the APC relative payment weights, including those claims for multiple procedures. As we have for several years, we are proposing to continue to use date of service stratification and a list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims. Through bypassing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this enables us to create multiple “pseudo” single procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pseudo” single procedure claims. The history of our use of a bypass list to generate “pseudo” single procedure claims is well documented, most recently in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68227 through 68229). In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and created the first composite APCs, and continued those policies through CY 2013. Increased packaging and creation of composite APCs also increased the number of bills that we were able to use for ratesetting by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the composite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the number of bills we were able to use in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for Start Printed Page 43545multiple imaging services through CY 2013, and are proposing to continue this policy for CY 2014. We also are proposing to further expand our packaging policies for CY 2014. We refer readers to section II.A.2.f. of this proposed rule for a discussion of the use of claims in modeling the costs for composite APCs and to section II.A.3. of this proposed rule for a discussion of our proposed packaging policies for CY 2014.

We are proposing to continue to apply these processes to enable us to use as much claims data as possible for ratesetting for the CY 2014 OPPS. This methodology enabled us to create, for this proposed rule, approximately 34 million “pseudo” single procedure claims, including multiple imaging composite “single session” bills (we refer readers to section II.A.2.f.(5) of this proposed rule for further discussion), to add to the approximately 48 million “natural” single procedure claims.

For CY 2014, we are proposing to bypass 179 HCPCS codes that are identified in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the list of codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure claims, we have calculated the percent of “natural” single bills that contained packaging for each HCPCS code and the amount of packaging on each “natural” single bill for each code. Each year, we generally retain the codes on the previous year's bypass list and use the updated year's data (for CY 2014, data available for the March 11, 2013 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2012 claims processed through September 30, 2012, and CY 2011 claims data processed through June 30, 2012, used to model the payment rates for CY 2013) to determine whether it would be appropriate to add additional codes to the previous year's bypass list. For CY 2014, we are proposing to continue to bypass all of the HCPCS codes on the CY 2013 OPPS bypass list, with the exception of HCPCS codes that we are proposing to delete for CY 2014, which are listed in Table 1 of this proposed rule. We also are proposing to remove HCPCS codes that are not separately paid under the OPPS because the purpose of the bypass list is to obtain more data for those codes relevant to ratesetting. Some of the codes we are proposing to remove from the CY 2014 bypass list are affected by the CY 2014 packaging proposal, discussed in section II.A.3. of this proposed rule. In addition, we are proposing to add to the bypass list for CY 2014 HCPCS codes not on the CY 2013 bypass list that, using either the CY 2013 final rule data (CY 2011 claims) or the March 11, 2013 Panel data (first 9 months of CY 2012 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2014 proposal to continue to develop OPPS relative payment weights based on geometric mean costs, we also are proposing that the packaged cost criterion continue to be based on the geometric mean cost. The entire list proposed for CY 2014 (including the codes that remain on the bypass list from prior years) is open to public comment. Because we must make some assumptions about packaging in the multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, we assumed that the representation of packaging on “natural” single procedure claims for any given code is comparable to packaging for that code in the multiple procedure claims. The proposed criteria for the bypass list are:

There are 100 or more “natural” single procedure claims for the code. This number of single procedure claims ensures that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.

Five percent or fewer of the “natural” single procedure claims for the code have packaged costs on that single procedure claim for the code. This criterion results in limiting the amount of packaging being redistributed to the separately payable procedures remaining on the claim after the bypass code is removed and ensures that the costs associated with the bypass code represent the cost of the bypassed service.

The geometric mean cost of packaging observed in the “natural” single procedure claims is equal to or less than $55. This criterion also limits the amount of error in redistributed costs. During the assessment of claims against the bypass criteria, we do not know the dollar value of the packaged cost that should be appropriately attributed to the other procedures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount and volume protects the validity of cost estimates for low cost services billed with the bypassed service.

We note that, as we did for CY 2013, we are proposing to continue to establish the CY 2014 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifying cost patterns, we are proposing to use the geometric mean cost of packaging to identify potential codes to add to the bypass list.

In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we considered whether it would be appropriate to update the $50 packaged cost threshold for inflation when examining potential bypass list additions. As discussed in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the packaged cost threshold more restrictive over time when considering additions to the bypass list. Therefore, adjusting the threshold by the market basket increase would prevent continuing decline in the threshold's real value. Based on the same rationale described for the CY 2013 OPPS/ASC final rule with comment period (77 FR 68221), we are proposing for CY 2014 to continue to update the packaged cost threshold by the market basket increase. By applying the final CY 2013 market basket increase of 1.8 percent to the prior nonrounded dollar threshold of $53.76 (77 FR 68221), we determined that the threshold would remain for CY 2014 at $55 ($54.73 rounded to $55, the nearest $5 increment). Therefore, we are proposing to set the geometric mean packaged cost threshold on the CY 2012 claims at $55 for a code to be considered for addition to the CY 2014 OPPS bypass list.

The code is not a code for an unlisted service. Unlisted codes do not describe a specific service, and thus their costs would not be appropriate for bypass list purposes.

In addition, we are proposing to continue to include on the bypass list HCPCS codes that CMS medical advisors believe have minimal associated packaging based on their clinical assessment of the complete CY 2014 OPPS proposal. Some of these codes were identified by CMS medical advisors and some were identified in prior years by commenters with specialized knowledge of the packaging associated with specific services. We also are proposing to continue to include certain HCPCS codes on the bypass list in order to purposefully direct the assignment of packaged costs to a companion code where services always appear together and where there would otherwise be few single procedure claims available for ratesetting. For example, we have previously discussed our reasoning for adding HCPCS code G0390 (Trauma response team associated with hospital Start Printed Page 43546critical care service) to the bypass list (73 FR 68513).

As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “pseudo” single procedure claims from bypassed codes that are also members of multiple imaging composite APCs changed. When creating the set of “pseudo” single procedure claims, claims that contain “overlap bypass codes” (those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs) were identified first. These HCPCS codes were then processed to create multiple imaging composite “single session” bills, that is, claims containing HCPCS codes from only one imaging family, thus suppressing the initial use of these codes as bypass codes. However, these “overlap bypass codes” were retained on the bypass list because, at the end of the “pseudo” single processing logic, we reassessed the claims without suppression of the “overlap bypass codes” under our longstanding “pseudo” single process to determine whether we could convert additional claims to “pseudo” single procedure claims. (We refer readers to section II.A.2.b. of this proposed rule for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” bills that could be used for calculating composite APC costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs are identified by asterisks (*) in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site).

Addendum N to this proposed rule includes the proposed list of bypass codes for CY 2014. The list of bypass codes contains codes that were reported on claims for services in CY 2012 and, therefore, includes codes that were in effect in 2012 and used for billing but were deleted for CY 2013. We retained these deleted bypass codes on the proposed CY 2014 bypass list because these codes existed in CY 2012 and were covered OPD services in that period, and CY 2012 claims data are used to calculate CY 2014 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the proposed multiple imaging composite APCs are identified by asterisks (*) in the third column of Addendum N to this proposed rule. HCPCS codes that we are proposing to add for CY 2014 are identified by asterisks (*) in the fourth column of Addendum N.

Table 1 below contains the list of codes that we are proposing to remove from the CY 2014 bypass list because these codes were either deleted from the HCPCS before CY 2012 (and therefore were not covered OPD services in CY 2012) or were not separately payable codes under the proposed CY 2014 OPPS because these codes are not used for ratesetting through the bypass process. The list of codes proposed for removal from the bypass list includes those that would be affected by the CY 2014 OPPS proposed packaging policy described in section II.A.3. of this proposed rule.

Table 1—HCPCS Codes Proposed To Be Removed From the CY 2014 Bypass List

HCPCS Code

HCPCS Short descriptor

17003

Destruct premalg les 2-14.

31231

Nasal endoscopy dx.

31505

Diagnostic laryngoscopy.

31579

Diagnostic laryngoscopy.

51741

Electro-uroflowmetry first.

51798

Us urine capacity measure.

54240

Penis study.

56820

Exam of vulva w/scope.

57452

Exam of cervix w/scope.

57454

Bx/curett of cervix w/scope.

69210

Remove impacted ear wax.

70030

X-ray eye for foreign body.

70100

X-ray exam of jaw <4 views.

70110

X-ray exam of jaw 4/> views.

70120

X-ray exam of mastoids.

70130

X-ray exam of mastoids.

70140

X-ray exam of facial bones.

70150

X-ray exam of facial bones.

70160

X-ray exam of nasal bones.

70200

X-ray exam of eye sockets.

70210

X-ray exam of sinuses.

70220

X-ray exam of sinuses.

70240

X-ray exam pituitary saddle.

70250

X-ray exam of skull.

70260

X-ray exam of skull.

70320

Full mouth x-ray of teeth.

70328

X-ray exam of jaw joint.

70330

X-ray exam of jaw joints.

70355

Panoramic x-ray of jaws.

70360

X-ray exam of neck.

70370

Throat x-ray & fluoroscopy.

70371

Speech evaluation complex.

71021

Chest x-ray frnt lat lordotc.

71022

Chest x-ray frnt lat oblique.

71023

Chest x-ray and fluoroscopy.

71030

Chest x-ray 4/> views.

71034

Chest x-ray&fluoro 4/> views.

71035

Chest x-ray special views.

71100

X-ray exam ribs uni 2 views.

71101

X-ray exam unilat ribs/chest.

71110

X-ray exam ribs bil 3 views.

71111

X-ray exam ribs/chest 4/> vws.

71120

X-ray exam breastbone 2/>vws.

71130

X-ray strenoclavic jt 3/>vws.

72010

X-ray exam spine ap&lat.

72020

X-ray exam of spine 1 view.

72040

X-ray exam neck spine 3/<vws.

72050

X-ray exam neck spine 4/5vws.

72052

X-ray exam neck spine 6/>vws.

72069

X-ray exam trunk spine stand.

72070

X-ray exam thorac spine 2vws.

72072

X-ray exam thorac spine 3vws.

72074

X-ray exam thorac spine 4/>vw.

72080

X-ray exam trunk spine 2 vws.

72090

X-ray exam scloiosis erect.

72100

X-ray exam l-s spine 2/3 vws.

72110

X-ray exam l-2 spine 4/>vws.

72114

X-ray exam l-s spine bending.

72120

X-ray bend only l-s spine.

72170

X-ray exam of pelvis.

72190

X-ray exam of pelvis.

72202

X-ray exam si joints 3/> vws.

72220

X-ray exam sacrum tailbone.

73000

X-ray exam of collar bone.

73010

X-ray exam of shoulder blade.

73020

X-ray exam of shoulder.

73030

X-ray exam of shoulder.

73050

X-ray exam of shoulders.

73060

X-ray exam of humerus.

73070

X-ray exam of elbow.

73080

X-ray exam of elbow.

73090

X-ray exam of forearm.

73100

X-ray exam of wrist.

73110

X-ray exam of wrist.

73120

X-ray exam of hand.

73130

X-ray exam of hand.

73140

X-ray exam of finger(s).

73510

X-ray exam of hip.

73520

X-ray exam of hips.

73540

X-ray exam of pelvis & hips.

73550

X-ray exam of thigh.

73560

X-ray exam of knee 1 or 2.

73562

X-ray exam of knee 3.

73564

X-ray exam knee 4 or more.

73565

X-ray exam of knees.

73590

X-ray exam of lower leg.

73600

X-ray exam of ankle.

73610

X-ray exam of ankle.

73620

X-ray exam of foot.

73630

X-ray exam of foot.

73650

X-ray exam of heel.

73660

X-ray exam of toe(s).

74000

X-ray exam of abdomen.

74010

X-ray exam of abdomen.

74020

X-ray exam of abdomen.

74022

X-ray exam series abdomen.

74210

Contrst x-ray exam of throat.

74220

Contrast x-ray esophagus.

74230

Cine/vid x-ray throat/esoph.

74246

Contrst x-ray uppr gi tract.

74247

Contrst x-ray uppr gi tract.

74249

Contrst x-ray uppr gi tract.

76100

X-ray exam of body section.

76510

Ophth us b & quant a.

76511

Ophth us quant a only.

76512

Ophth us b w/non-quant a.

76513

Echo exam of eye water bath.

76514

Echo exam of eye thickness.

76516

Echo exam of eye.

76519

Echo exam of eye.

76536

Us exam of head and neck.

76645

Us exam breast(s).

76801

Ob us < 14 wks single fetus.

76805

Ob us >/= 14 wks sngl fetus.

76811

Ob us detailed sngl fetus.

76816

Ob us follow-up per fetus.

76817

Transvaginal us obstetric.

Start Printed Page 43547

76830

Transvaginal us non-ob.

76881

Us xtr non-vasc complete.

76882

Us xtr non-vasc lmtd.

76970

Ultrasound exam follow-up.

77072

X-rays for bone age.

77073

X-rays bone length studies.

77074

X-rays bone survey limited.

77075

X-rays bone survey complete.

77076

X-rays bone survey infant.

77077

Joint survey single view.

77082

Dxa bone density vert fx.

77084

Magnetic image bone marrow.

77300

Radiation therapy dose plan.

77301

Radiotherapy dose plan imrt.

77305

Teletx isodose plan simple.

77310

Teletx isodose plan intermed.

77315

Teletx isodose plan complex.

77327

Brachytx isodose calc interm.

77331

Special radiation dosimetry.

77336

Radiation physics consult.

77338

Design mlc device for imrt.

77370

Radiation physics consult.

80500

Lab pathology consultation.

80502

Lab pathology consultation.

85097

Bone marrow interpretation.

86510

Histoplasmosis skin test.

86850

RBC antibody screen.

86870

RBC antibody identification.

86880

Coombs test direct.

86885

Coombs test indirect qual.

86886

Coombs test indirect titer.

86890

Autologous blood process.

86900

Blood typing abo.

86901

Blood typing rh (d).

86904

Blood typing patient serum.

86905

Blood typing rbc antigens.

86906

Blood typing rh phenotype.

86930

Frozen blood prep.

86970

Rbc pretx incubatj w/chemicl.

86977

Rbc serum pretx incubj/inhib.

88104

Cytopath fl nongyn smears.

88106

Cytopath fl nongyn filter.

88108

Cytopath concentrate tech.

88112

Cytopath cell enhance tech.

88120

Cytp urne 3-5 probes ea spec.

88160

Cytopath smear other source.

88161

Cytopath smear other source.

88162

Cytopath smear other source.

88172

Cytp dx eval fna 1st ea site.

88173

Cytopath eval fna report.

88182

Cell marker study.

88184

Flowcytometry/tc 1 marker.

88185

Flowcytometry/tc add-on.

88189

Flowcytometry/read 16 & >.

88300

Surgical path gross.

88302

Tissue exam by pathologist.

88304

Tissue exam by pathologist.

88305

Tissue exam by pathologist.

88307

Tissue exam by pathologist.

88311

Decalcify tissue.

88312

Special stains group 1.

88313

Special stains group 2.

88314

Histochemical stains add-on.

88321

Microslide consultation.

88323

Microslide consultation.

88325

Comprehensive review of data.

88329

Path consult introp.

88331

Path consult intraop 1 bloc.

88342

Immunohistochemistry.

88346

Immunofluorescent study.

88347

Immunofluorescent study.

88348

Electron microscopy.

88358

Analysis tumor.

88360

Tumor immunohistochem/manual.

88361

Tumor immunohistochem/comput.

88365

Insitu hybridization (fish).

88368

Insitu hybridization manual.

88385

Eval molecul probes 51-250.

88386

Eval molecul probes 251-500.

89049

Chct for mal hyperthermia.

89220

Sputum specimen collection.

89230

Collect sweat for test.

89240

Pathology lab procedure.

90472

Immunization admin each add.

90474

Immune admin oral/nasal addl.

92020

Special eye evaluation.

92025

Corneal topography.

92060

Special eye evaluation.

92081

Visual field examination(s).

92082

Visual field examination(s).

92083

Visual field examination(s).

92133

Cmptr ophth img optic nerve.

92134

Cptr ophth dx img post segmt.

92136

Ophthalmic biometry.

92225

Special eye exam initial.

92226

Special eye exam subsequent.

92230

Eye exam with photos.

92240

Icg angiography.

92250

Eye exam with photos.

92275

Electroretinography.

92285

Eye photography.

92286

Internal eye photography.

92520

Laryngeal function studies.

92541

Spontaneous nystagmus test.

92542

Positional nystagmus test.

92546

Sinusoidal rotational test.

92548

Posturography.

92550

Tympanometry & reflex thresh.

92552

Pure tone audiometry air.

92553

Audiometry air & bone.

92555

Speech threshold audiometry.

92556

Speech audiometry complete.

92557

Comprehensive hearing test.

92567

Tympanometry.

92570

Acoustic immitance testing.

92582

Conditioning play audiometry.

92585

Auditor evoke potent compre.

92603

Cochlear implt f/up exam 7/>.

92604

Reprogram cochlear implt 7/>.

92626

Eval aud rehab status.

93005

Electrocardiogram tracing.

93017

Cardiovascular stress test.

93225

Ecg monit/reprt up to 48 hrs.

93226

Ecg monit/reprt up to 48 hrs.

93229

Remote 30 day ecg tech supp.

93270

Remote 30 day ecg rev/report.

93271

Ecg/monitoring and analysis.

93278

ECG/signal-averaged.

93290

Icm device eval.

93306

Tte w/doppler complete.

93701

Bioimpedance cv analysis.

93786

Ambulatory BP recording.

93788

Ambulatory BP analysis.

93880

Extracranial bilat study.

93882

Extracranial uni/ltd study.

93886

Intracranial complete study.

93888

Intracranial limited study.

93922

Upr/l xtremity art 2 levels.

93923

Upr/lxtr art stdy 3+ lvls.

93924

Lwr xtr vasc stdy bilat.

93925

Lower extremity study.

93926

Lower extremity study.

93930

Upper extremity study.

93931

Upper extremity study.

93965

Extremity study.

93970

Extremity study.

93971

Extremity study.

93975

Vascular study.

93976

Vascular study.

93978

Vascular study.

93979

Vascular study.

93990

Doppler flow testing.

94015

Patient recorded spirometry.

94690

Exhaled air analysis.

95250

Glucose monitoring cont.

95800

Slp stdy unattended.

95803

Actigraphy testing.

95805

Multiple sleep latency test.

95806

Sleep study unatt&resp efft.

95807

Sleep study attended.

95808

Polysom any age 1-3> param.

95810

Polysom 6/> yrs 4/> param.

95812

Eeg 41-60 minutes.

95813

Eeg over 1 hour.

95816

Eeg awake and drowsy.

95819

Eeg awake and asleep.

95822

Eeg coma or sleep only.

95869

Muscle test thor paraspinal.

95872

Muscle test one fiber.

95900

Motor nerve conduction test.

95921

Autonomic nrv parasym inervj.

95925

Somatosensory testing.

95926

Somatosensory testing.

95930

Visual evoked potential test.

95950

Ambulatory eeg monitoring.

95953

EEG monitoring/computer.

96000

Motion analysis video/3d.

96361

Hydrate iv infusion add-on.

96366

Ther/proph/diag iv inf addon.

96367

Tx/proph/dg addl seq iv inf.

96370

Sc ther infusion addl hr.

96371

Sc ther infusion reset pump.

96375

Tx/pro/dx inj new drug addon.

96411

Chemo iv push addl drug.

96415

Chemo iv infusion addl hr.

96417

Chemo iv infus each addl seq.

96423

Chemo ia infuse each addl hr.

G0365

Vessel mapping hemo access.

G0399

Home sleep test/type 3 Porta.

G0416

Sat biopsy 10-20.

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)

For CY 2014, we are proposing to continue to use the hospital-specific overall ancillary and departmental cost-to-charge ratios (CCRs) to convert charges to estimated costs through application of a revenue code-to-cost center crosswalk. To calculate the APC costs on which the proposed CY 2014 APC payment rates are based, we calculated hospital-specific overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for Start Printed Page 43548which we had CY 2012 claims data from the most recent available hospital cost reports, in most cases, cost reports beginning in CY 2011. For the CY 2014 OPPS proposed rates, we used the set of claims processed during CY 2012. We applied the hospital-specific CCR to the hospital's charges at the most detailed level possible, based on a revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate costs from charges for each revenue code. That crosswalk is available for review and continuous comment on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

To ensure the completeness of the revenue code-to-cost center crosswalk, we reviewed changes to the list of revenue codes for CY 2012 (the year of claims data we used to calculate the proposed CY 2014 OPPS payment rates) and found that the National Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 2012 Data Specifications Manual.

In accordance with our longstanding policy, we calculated CCRs for the standard and nonstandard cost centers accepted by the electronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 67983 through 67985). One longstanding exception to this general methodology for calculation of CCRs used for converting charges to costs on each claim, as detailed in the CY 2007 OPPS/ASC final rule with comment period, is the calculation of blood costs, as discussed in section II.A.2.d.(2) of this proposed rule and which has been our standard policy since the CY 2005 OPPS.

For the CCR calculation process, we used the same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCR calculation that excluded the costs of paramedical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC final rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those hospitals that filed outpatient claims in CY 2012 before determining whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each cost center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information System (HCRIS). We used the most recent available cost report data, in most cases, cost reports with cost reporting periods beginning in CY 2011. For this proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2014 OPPS payment rates. If the most recently available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the overall ancillary CCR referenced above for all purposes that require use of an overall ancillary CCR. We are proposing to continue this longstanding methodology for the calculation of costs for CY 2014.

Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-based weights due to “charge compression,” which is the practice of applying a lower charge markup to higher cost services and a higher charge markup to lower cost services. As a result, the cost-based weights may reflect some aggregation bias, undervaluing high-cost items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. This issue was evaluated in a report by Research Triangle Institute, International (RTI). The RTI final report can be found on RTI's Web site at: http://www.rti.org/​reports/​cms/​HHSM-500-2005-0029I/​PDF/​Refining_​Cost_​to_​Charge_​Ratios_​200807_​Final.pdf. For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 68527).

We addressed the RTI finding that there was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 45467). Specifically, we created one cost center for “Medical Supplies Charged to Patients” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current cost center for “Medical Supplies Charged to Patients” into one cost center for low-cost medical supplies and another cost center for high-cost implantable devices in order to mitigate some of the effects of charge compression. In determining the items that should be reported in these respective cost centers, we adopted commenters' recommendations that hospitals should use revenue codes established by the AHA's NUBC to determine the items that should be reported in the “Medical Supplies Charged to Patients” and the “Implantable Devices Charged to Patients” cost centers. For a complete discussion of the rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” public comments, and our responses, we refer readers to the FY 2009 IPPS final rule.

The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginning on or after May 1, 2009. In the CY 2013 OPPS/ASC final rule with comment period, we determined that a significant volume of hospitals were utilizing the “Implantable Devices Charged to Patients” cost center. Because a sufficient amount of data from which to generate a meaningful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Implantable Devices Charged to Patients” cost center (77 FR 68225). For the CY 2014 OPPS, we are proposing to continue to use data from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR for use in calculating the OPPS relative payment weights.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to create new standard cost centers for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac Catheterization,” and to require that hospitals report the costs and charges for these services under new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the costs and charges of CT scans, MRIs, and cardiac catheterization differ significantly from the costs and charges of other services included in the standard associated cost center. RTI concluded that both the IPPS and the OPPS relative payment weights would better estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in order for Start Printed Page 43549hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to estimate the cost from charges on claims data. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion on the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac catheterization. The new standard cost centers for CT scans, MRIs, and cardiac catheterization were effective for cost report periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10.

Using the December 2012 HCRIS update which we use to estimate costs in the CY 2014 OPPS ratesetting process, we were able to calculate a valid implantable device CCR for 2,936 hospitals, a valid MRI CCR for 1,853 hospitals, a valid CT scan CCR for 1,956 hospitals, and a valid Cardiac Catheterization CCR for 1,367 hospitals. We believe that there is a sufficient amount of data in the Form CMS 2552-10 cost reports from which to generate a meaningful analysis of CCRs. Therefore, we are providing various data analyses below in Tables 2 and 3 demonstrating the changes as a result of including the new CCRs calculated from the new standard cost centers into the CY 2014 OPPS ratesetting process.

We note that the estimated changes in geometric mean estimated APC cost of using data from the new standard cost centers cited above appear consistent with the expected results based on RTI's analysis of cost report and claims data in the July 2008 final report (pages 5 and 6), which state “in hospitals that aggregate data for CT scanning, MRI, or Start Printed Page 43550nuclear medicine services with the standard line for Diagnostic Radiology, costs for these services all appear substantially overstated, while the costs for plain films, ultrasound and other imaging procedures are correspondingly understated.” We also note that there are limited additional impacts in the implantable device related APCs due to using the new cost report form CMS 2552-10 because the standard cost center for implantable medical devices was previously incorporated into cost report form CMS 2552-96.

As we have discussed in prior rulemaking (77 FR 68223 through 68225), once we determined that cost report data were available for analysis, we would propose, if appropriate to use the distinct CCRs described above in the calculation of the OPPS relative payment weights. We believe that the analytic findings described above support the original decision to develop distinct standard cost centers for implantable devices, MRIs, CT scans, and cardiac catheterization, and we see no reason to further delay proposing to implement the CCRs of each of these cost centers. Therefore, beginning in CY 2014, we are proposing to calculate the OPPS relative payment weights using distinct CCRs for cardiac catheterization, CT scan, and MRI and to continue using a distinct CCR for implantable medical devices. Section XXIII. of this proposed rule includes the impacts of calculating the proposed CY 2014 OPPS relative payment weights using these new standard cost centers.

2. Proposed Data Development Process and Calculation of Costs Used for Ratesetting

In this section of this proposed rule, we discuss the use of claims to calculate the proposed OPPS payment rates for CY 2014. The Hospital OPPS page on the CMS Web site on which this proposed rule is posted (http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html) provides an accounting of claims used in the development of the proposed payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. The CMS Web site, http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html, includes information about purchasing the “OPPS Limited Data Set,” which now includes the additional variables previously available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes and revenue code payment amounts. This file is derived from the CY 2012 claims that were used to calculate the proposed payment rates for the CY 2014 OPPS.

In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this policy changed the cost metric on which the relative payments are based, the data process in general remained the same, under the methodologies that we used to obtain appropriate claims data and accurate cost information in determining estimated service cost. For CY 2014, we are proposing to continue to use geometric mean costs to calculate the relative weights on which the proposed CY 2014 OPPS payments rates are based.

We used the methodology described in sections II.A.2.a. through II.A.2.f. of this proposed rule to calculate the costs we used to establish the proposed relative weights used in calculating the proposed OPPS payment rates for CY 2014 shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We refer readers to section II.A.4. of this proposed rule for a discussion of the conversion of APC costs to scaled payment weights.

a. Claims Preparation

For this proposed rule, we used the CY 2012 hospital outpatient claims processed through December 31, 2012, to calculate the geometric mean costs of APCs that underpin the proposed relative payment weights for CY 2014. To begin the calculation of the proposed relative payment weights for CY 2014, we pulled all claims for outpatient services furnished in CY 2012 from the national claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory tests for persons who are neither inpatients nor outpatients of the hospital).

We then excluded claims with condition codes 04, 20, 21, and 77 because these are claims that providers submitted to Medicare knowing that no payment would be made. For example, providers submit claims with a condition code 21 to elicit an official denial notice from Medicare and document that a service is not covered. We then excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands because hospitals in those geographic areas are not paid under the OPPS, and, therefore, we do not use claims for services furnished in these areas in ratesetting.

We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 116 million claims that contain hospital bill types paid under the OPPS.

1. Claims that were not bill types 12X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital—Laboratory Services Provided to Nonpatients), or 76X (Clinic—Community Mental Health Center). Other bill types are not paid under the OPPS; therefore, these claims were not used to set OPPS payment.

2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 13X are hospital outpatient claims. Claims with bill type 14X are laboratory specimen claims, of which we use a subset for the limited number of services in these claims that are paid under the OPPS.

3. Claims that were bill type 76X (CMHC).

To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hospital-specific CCR associated with the revenue code for the charge as discussed in section II.A.1.c. of this proposed rule. We then flagged and excluded CAH claims (which are not paid under the OPPS) and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclusive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less than 0.0001); and those from hospitals with overall ancillary CCRs that were identified as outliers (that exceeded +/−3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outliers if they exceeded +/− 3 standard deviations from the geometric mean. We used a four-tiered hierarchy of cost center CCRs, which is the revenue code-to-cost center crosswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that Start Printed Page 43551is relevant to OPPS services, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital's cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing” so that another cost center CCR in the revenue center hierarchy could apply. If no other cost center CCR could apply to the revenue code on the claim, we used the hospital's overall ancillary CCR for the revenue code in question as the default CCR. For example, if a visit was reported under the clinic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code. The revenue code-to-cost center crosswalk is available for inspection on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html. Revenue codes that we do not use in establishing relative costs or to model impacts are identified with an “N” in the revenue code-to-cost center crosswalk.

We applied the CCRs as described above to claims with bill type 12X, 13X, or 14X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals for which CCRs were flagged as invalid.

We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above.

We then excluded claims without a HCPCS code. We moved to another file claims that contained only influenza and pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost; therefore, these claims are not used to set OPPS rates.

We next copied line-item costs for drugs, blood, and brachytherapy sources to a separate file (the lines stay on the claim, but are copied onto another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit arithmetic and geometric mean and median cost and a per day arithmetic and geometric mean and median cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment rates, such as a unit-to-day ratio for drugs.

Prior to CY 2013, our payment policy for nonpass-through separately paid drugs and biologicals was based on a redistribution methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid for separately payable drugs and biologicals under the OPPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not redistribute the pharmacy overhead costs from packaged drugs to separately paid drugs. For the CY 2014 OPPS, we are proposing to continue the CY 2013 payment policy for separately payable drugs and biologicals. We refer readers to section V.B.3. of this proposed rule for a complete discussion of our CY 2014 proposed payment policy for separately paid drugs and biologicals.

We then removed line-items that were not paid during claim processing, presumably for a line-item rejection or denial. The number of edits for valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payable services to set payment rates, we removed line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” or “V,” in the prospective year's payment system. This logic preserves charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly removed from the inpatient list for CY 2013 that were assigned status indicator “C” in the claim year. It also preserves charges for packaged services so that the costs can be included in the cost of the services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of another service that was reported on the same claim or the code otherwise violates claims processing edits.

For CY 2014, we are proposing to continue the policy we implemented for CY 2013 to exclude line-item data for pass-through drugs and biologicals (status indicator “G” for CY 2012) and nonpass-through drugs and biologicals (status indicator “K” for CY 2012) where the charges reported on the claim for the line were either denied or rejected during claims processing. Removing lines that were eligible for payment but were not paid ensures that we are using appropriate data. The trim avoids using cost data on lines that we believe were defective or invalid because those rejected or denied lines did not meet the Medicare requirements for payment. For example, edits may reject a line for a separately paid drug because the number of units billed exceeded the number of units that would be reasonable and, therefore, is likely a billing error (for example, a line reporting 55 units of a drug for which 5 units is known to be a fatal dose). As with our trimming in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68226) of line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly reported and, therefore, should not be used for ratesetting. We believe that removing lines with valid status indicators that were edited and not paid during claims processing increases the accuracy of the data used for ratesetting purposes.

For the CY 2014 OPPS, as part of the proposal to package clinical diagnostic laboratory tests, we also are proposing to apply the line item trim to these services if they did not receive payment in the claims year. Removing these lines ensures that, in establishing the CY 2014 OPPS relative payments weights, we appropriately allocate the costs associated with packaging these services. For a more detailed discussion of the proposal to package clinical diagnostic laboratory tests, we refer readers to section II.A.3.b.(3) of this proposed rule.

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims

(1) Splitting Claims

For the CY 2014 OPPS, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups are presented below.) We note that, under the proposed CY 2014 OPPS packaging policy, we are proposing to delete status indicator “X” and revise the title and description of status indicator “Q1” to reflect that deletion, as discussed in sections II.A.3. and XI. of this proposed rule. For CY 2014, we are proposing to define major procedures as any HCPCS code having a status indicator of “S,” “T,” or “V”; to define minor procedures as any code Start Printed Page 43552having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; and to classify “other” procedures as any code having a status indicator other than one that we have classified as major or minor. For CY 2014, we are proposing to continue to assign status indicator “R” to blood and blood products; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “STV-packaged codes”; status indicator “Q2” to all “T-packaged codes”; and status indicator “Q3” to all codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met.

As discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate identification of the different categories of codes. We are proposing to treat these codes in the same manner for data purposes for CY 2014 as we have treated them since CY 2008. Specifically, we are continuing to evaluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are carried through the data either with status indicator “N” as packaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” single procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in the combinations that qualify for payment as composite APCs and, therefore, they carry the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes during both the split and “pseudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.f. of this proposed rule.

Specifically, we are proposing to divide the remaining claims into the following five groups:

1. Single Procedure Major Claims: Claims with a single separately payable procedure (that is, status indicator “S,” “T,” or “V” which includes codes with status indicator “Q3”); claims with one unit of a status indicator “Q1” code (“STV-packaged”) where there was no code with status indicator “S,” “T,” or “V” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T-packaged”) where there was no code with a status indicator “T” on the same claim on the same date.

2. Multiple Procedure Major Claims: Claims with more than one separately payable procedure (that is, status indicator “S,” “T,” or “V,” which includes codes with status indicator “Q3”), or multiple units of one payable procedure. These claims include those codes with a status indicator “Q2” code (“T-packaged”) where there was no procedure with a status indicator “T” on the same claim on the same date of service but where there was another separately paid procedure on the same claim with the same date of service (that is, another code with status indicator “S ” or “V”). We also include in this set claims that contained one unit of one code when the bilateral modifier was appended to the code and the code was conditionally or independently bilateral. In these cases, the claims represented more than one unit of the service described by the code, notwithstanding that only one unit was billed.

4. Multiple Procedure Minor Claims: Claims with multiple HCPCS codes that are assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; claims that contain more than one code with status indicator “Q1” (“STV-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” or “V” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q1,” or more than one unit of a code with status indicator “Q2” but no code with status indicator “T” on the same date of service.

5. Non-OPPS Claims: Claims that contain no services payable under the OPPS (that is, all status indicators other than those listed for major or minor status). These claims were excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment, and do not contain a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS).

The claims listed in numbers 1, 2, 3, and 4 above are included in the data file that can be purchased as described above. Claims that contain codes to which we have assigned status indicators “Q1” (“STV-packaged”) and “Q2” (“T-packaged”) appear in the data for the single major file, the multiple major file, and the multiple minor file used for ratesetting. Claims that contain codes to which we have assigned status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major files used in this proposed rule, depending on the specific composite calculation.

(2) Creation of “Pseudo” Single Procedure Claims

To develop “pseudo” single procedure claims for this proposed rule, we examined both the multiple procedure major claims and the multiple procedure minor claims. We first examined the multiple major procedure claims for dates of service to determine if we could break them into “pseudo” single procedure claims using the dates of service for all lines on the claim. If we could create claims with single major procedures by using dates of service, we created a single procedure claim record for each separately payable procedure on a different date of service (that is, a “pseudo” single procedure claim).

We also are proposing to use the bypass codes listed in Addendum N to this proposed rule (which is available via the Internet on our Web site) and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initial assessment for “pseudo” single procedure claims. The proposed CY 2014 “overlap bypass codes” are listed in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass list, we split the claim into two “pseudo” single procedure claim records. The single procedure claim record that contained the bypass code did not retain packaged services. The single procedure claim record that contained the other separately payable procedure (but no bypass code) retained the packaged revenue code charges and Start Printed Page 43553the packaged HCPCS code charges. We also removed lines that contained multiple units of codes on the bypass list and treated them as “pseudo” single procedure claims by dividing the cost for the multiple units by the number of units on the line. If one unit of a single, separately payable procedure code remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determine if the proposed criteria for the multiple imaging composite APCs, discussed in section II.A.2.f.(5) of this proposed rule, were met. If the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging composite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be packaged and, if so, the code ceased to be available for further assessment as part of the composite APC. Because the packaged code would not be a separately payable procedure, we considered it to be unavailable for use in setting the composite APC costs on which the proposed CY 2014 OPPS payments are based. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass codes,” a single unit of a single separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes.

We also are proposing to examine the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes with status indicator “Q1” (“STV-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest CY 2013 relative payment weight, set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q1.” We then packaged all costs for the following into a single cost for the “Q1” HCPCS code that had the highest CY 2013 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2013 relative payment weight; other codes with status indicator “Q1”; and all other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from the data status indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for further data processing and considered this claim as a major procedure claim. We used this claim in the calculation of the APC geometric mean cost for the status indicator “Q1” HCPCS code.

Similarly, if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or multiple units of a single code with status indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest CY 2013 relative payment weight and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the “Q2” HCPCS code that had the highest CY 2013 relative payment weight to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2013 relative payment weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. We changed the status indicator for the selected code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned, and we considered this claim as a major procedure claim.

If a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STV-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest relative payment weight for CY 2013 and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T packaged”) HCPCS code to create a “pseudo” single procedure claim for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2013 relative payment weight; other codes with status indicator “Q2”; codes with status indicator “Q1” (“STV-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2013 relative payment weights. If a status indicator “Q1” HCPCS code had a higher CY 2013 relative payment weight, it became the primary code for the simulated single bill process. We changed the status indicator for the selected status indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim.

We then applied our proposed process for creating “pseudo” single procedure claims to the conditionally packaged codes that do not meet the criteria for packaging, which enabled us to create single procedure claims from them, if they met the criteria for single procedure claims. Conditionally packaged codes are identified using status indicators “Q1” and “Q2,” and are described in section XI.A. of this proposed rule.

Lastly, we excluded those claims that we were not able to convert to single procedure claims even after applying all of the techniques for creation of “pseudo” single procedure claims to multiple procedure major claims and to multiple procedure minor claims. As has been our practice in recent years, we also excluded claims that contained codes that were viewed as independently or conditionally bilateral and that contained the bilateral modifier (Modifier 50 (Bilateral procedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that hospitals billed the code with a unit of one.

We are proposing to continue to apply the methodology described above for the purpose of creating “pseudo” single procedure claims for the CY 2014 OPPS.

c. Completion of Claim Records and Geometric Mean Cost Calculations

(1) General Process

We then packaged the costs of packaged HCPCS codes (codes with status indicator “N” listed in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) and the costs of those Start Printed Page 43554lines for codes with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the services reported under packaged revenue codes in Table 4 below that appeared on the claim without a HCPCS code into the cost of the single major procedure remaining on the claim. For a more complete discussion of our proposed CY 2014 OPPS packaging policy, we refer readers to section II.A.3. of this proposed rule.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that CMS should review the final list of packaged revenue codes for consistency with OPPS policy and ensure that future versions of the I/OCE edit accordingly. As we have in the past, we are proposing to continue to compare the final list of packaged revenue codes that we adopt for CY 2014 to the revenue codes that the I/OCE will package for CY 2014 to ensure consistency.

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment on the CY 2010 proposed list of packaged revenue codes.

For CY 2014, as we did for CY 2013, we reviewed the changes to revenue codes that were effective during CY 2012 for purposes of determining the charges reported with revenue codes but without HCPCS codes that we would propose to package for CY 2014. We believe that the charges reported under the revenue codes listed in Table 4 below continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2014, we are proposing to continue to package the costs that we derive from the charges reported without HCPCS codes under the revenue codes displayed in Table 4 below for purposes of calculating the geometric mean costs on which the proposed CY 2014 OPPS/ASC payment rates are based.

Table 4—Proposed CY 2014 Packaged Revenue Codes

Revenue code

Description

0250

Pharmacy; General Classification.

0251

Pharmacy; Generic Drugs.

0252

Pharmacy; Non-Generic Drugs.

0254

Pharmacy; Drugs Incident to Other Diagnostic Services.

0255

Pharmacy; Drugs Incident to Radiology.

0257

Pharmacy; Non-Prescription.

0258

Pharmacy; IV Solutions.

0259

Pharmacy; Other Pharmacy.

0260

IV Therapy; General Classification.

0261

IV Therapy; Infusion Pump.

0262

IV Therapy; IV Therapy/Pharmacy Svcs.

0263

IV Therapy; IV Therapy/Drug/Supply Delivery.

0264

IV Therapy; IV Therapy/Supplies.

0269

IV Therapy; Other IV Therapy.

0270

Medical/Surgical Supplies and Devices; General Classification.

0271

Medical/Surgical Supplies and Devices; Non-sterile Supply.

0272

Medical/Surgical Supplies and Devices; Sterile Supply.

0275

Medical/Surgical Supplies and Devices; Pacemaker.

0276

Medical/Surgical Supplies and Devices; Intraocular Lens.

0278

Medical/Surgical Supplies and Devices; Other Implants.

0279

Medical/Surgical Supplies and Devices; Other Supplies/Devices.

0280

Oncology; General Classification.

0289

Oncology; Other Oncology.

0343

Nuclear Medicine; Diagnostic Radiopharmaceuticals.

0344

Nuclear Medicine; Therapeutic Radiopharmaceuticals.

0370

Anesthesia; General Classification.

0371

Anesthesia; Anesthesia Incident to Radiology.

0372

Anesthesia; Anesthesia Incident to Other DX Services.

0379

Anesthesia; Other Anesthesia.

0390

Administration, Processing and Storage for Blood and Blood Components; General Classification.

0392

Administration, Processing and Storage for Blood and Blood Components; Processing and Storage.

0399

Administration, Processing and Storage for Blood and Blood Components; Other Blood Handling.

Hemodialysis-Outpatient or Home; Hemodialysis Composite or Other Rate.

0824

Hemodialysis-Outpatient or Home; Maintenance—100%.

0825

Hemodialysis-Outpatient or Home; Support Services.

0829

Hemodialysis-Outpatient or Home; Other OP Hemodialysis.

0942

Other Therapeutic Services (also see 095X, an extension of 094x); Education/Training.

0943

Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac Rehabilitation.

0948

Other Therapeutic Services (also see 095X, an extension of 094X), Pulmonary Rehabilitation.

In accordance with our longstanding policy, we are proposing to continue to exclude: (1) Claims that had zero costs after summing all costs on the claim; and (2) claims containing packaging flag number 3. Effective for services furnished on or after July 1, 2004, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a service with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the fiscal intermediary or Medicare administrative contractor (MAC) was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the relative payment weight of the APC to which each code was assigned. We do not believe that these charges, which were token charges as submitted by the hospital, are valid reflections of hospital resources. Therefore, we deleted these claims. We also deleted claims for which the charges equaled the revenue center payment (that is, the Medicare payment) on the assumption that, where the charge equaled the payment, to apply a CCR to the charge would not yield a valid estimate of relative provider cost. We are proposing to continue these processes for the CY 2014 OPPS.

For the remaining claims, we are proposing to then standardize 60 percent of the costs of the claim (which we have previously determined to be the labor-related portion) for geographic differences in labor input costs. We made this adjustment by determining the wage index that applied to the hospital that furnished the service and dividing the cost for the separately paid HCPCS code furnished by the hospital by that wage index. The claims accounting that we provide for the proposed and final rule contains the formula we use to standardize the total cost for the effects of the wage index. As has been our policy since the inception of the OPPS, we are proposing to use the pre-reclassified wage indices for standardization because we believe that they better reflect the true costs of items and services in the area in which the hospital is located than the post-reclassification wage indices and, therefore, would result in the most accurate unadjusted geometric mean costs.

In accordance with our longstanding practice, we also are proposing to exclude single and “pseudo” single procedure claims for which the total cost on the claim was outside 3 standard deviations from the geometric mean of units for each HCPCS code on the bypass list (because, as discussed above, we used claims that contain multiple units of the bypass codes).

After removing claims for hospitals with error CCRs, claims without HCPCS codes, claims for immunizations not covered under the OPPS, and claims for services not paid under the OPPS, approximately 112 million claims were left. Using these approximately 112 million claims, we created approximately 82 million single and “pseudo” single procedure claims, of which we used slightly more than 82 million single bills (after trimming out approximately 1 million claims as discussed in section II.A.1.a. of this proposed rule) in the CY 2014 geometric mean cost development and ratesetting.

As discussed above, the OPPS has historically developed the relative weights on which APC payments are based using APC median costs. For the CY 2013 OPPS, we calculated the APC relative payment weights using geometric mean costs, and are proposing to do the same for CY 2014. Therefore, the following discussion of the 2 times rule violation and the development of the relative payment weight refers to geometric means. For more detail about the CY 2014 OPPS/ASC policy to calculate relative payment weights based on geometric means, we refer readers to section II.A.2.f. of this proposed rule.

We are proposing to use these claims to calculate the CY 2014 geometric mean costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC geometric mean costs determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group shall not be treated as comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so elected) for an item or service within the same group (the 2 times rule). While we have historically applied the 2 times rule based on median costs, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS relative payment weights based on geometric mean costs, we also applied Start Printed Page 43556the 2 times rule based on geometric mean costs. For the CY 2014 OPPS, we are proposing to continue to develop the APC relative payment weights based on geometric mean costs.

We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC geometric mean cost to be significant. This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 82 million single procedure or single session claims we use for establishing geometric mean costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC geometric mean. We note that this method of identifying significant HCPCS codes within an APC for purposes of the 2 times rule was used in prior years under the median-based cost methodology. Under our proposed CY 2014 policy to continue to base the relative payment weights on geometric mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent with their use in the median-based cost methodology. Unlisted codes are not used in establishing the percent of claims contributing to the APC, nor are their costs used in the calculation of the APC geometric mean. Finally, we reviewed the geometric mean costs for the services for which we are proposing to pay separately under this proposed rule, and we reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and resource homogeneity within the APCs. The APC geometric means were recalculated after we reassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means and the APC geometric means were weighted to account for the inclusion of multiple units of the bypass codes in the creation of “pseudo” single procedure claims.

As we discuss in sections II.A.2.d. and II.A.2.f. and in section VIII.B. of this proposed rule, in some cases, APC geometric mean costs are calculated using variations of the process outlined above. Specifically, section II.A.2.d. of this proposed rule addresses the proposed calculation of single APC criteria-based geometric mean costs. Section II.A.2.f. of this proposed rule discusses the proposed calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of this proposed rule addresses the methodology for calculating the proposed geometric mean costs for partial hospitalization services.

(2) Recommendations of the Advisory Panel on Hospital Outpatient Payment Regarding Data Development

At the March 11, 2013 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel), we provided the Data Subcommittee with a list of all APCs fluctuating by greater than 10 percent when comparing the CY 2013 OPPS/ASC final rule costs based on CY 2011 claims processed through June 30, 2012, to those based on CY 2012 OPPS/ASC final rule data (CY 2011 claims processed through June 30, 2011). The Data Subcommittee reviewed the fluctuations in the APC costs and their respective weights.

At the March 2013 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel's recommendations and our responses follow.

Recommendation: The Panel recommends that the work of the Data Subcommittee continue.

CMS Response: We are accepting this recommendation.

Recommendation: The panel recommended that CMS provide data on the impact of the CY 2013 method of using geometric mean costs rather than median costs to establish relative APC weights.

CMS Response: We are accepting this recommendation and will provide the data at a future meeting.

d. Proposed Calculation of Single Procedure APC Criteria-Based Costs

(1) Device-Dependent APCs

Historically, device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implanted or used to perform the procedure. The standard methodology for calculating device-dependent APC costs utilizes claims data that generally reflect the full cost of the required device by using only the subset of single procedure claims that pass the procedure-to-device and device-to-procedure edits; do not contain token charges (less than $1.01) for devices; do not contain the “FB” modifier signifying that the device was furnished without cost to the provider, or where a full credit was received; and do not contain the “FC” modifier signifying that the hospital received partial credit for the device. For a full history of how we have calculated payment rates for device-dependent APCs in previous years and a detailed discussion of how we developed the standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the procedure-to-device edits and device-to-procedure edits used in ratesetting for device-dependent APCs are available in the CY 2005 OPPS final rule with comment period (69 FR 65761 through 65763) and the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 through 68071).

For CY 2014, we are proposing in section II.A.2.e. of this proposed rule to define 29 device-dependent APCs as single complete services and to assign them to comprehensive APCs that would provide all-inclusive payments for those services. As we explain in that section, we are proposing this as a further step to improve the accuracy and transparency of our payments for these services where the cost of the device is large compared to the other costs that contribute to the cost of the service. Table 5 below provides a list of the 39 APCs currently recognized as device-dependent APCs and identifies those 29 APCs that we are proposing to include in the comprehensive APCs proposal. We are proposing to treat the remaining 10 device-dependent APCs by applying our standard APC ratesetting methodology to calculate their CY 2014 payment rates. We initially adopted a specific device-dependent APC ratesetting methodology because commenters had previously expressed concerns that the costs associated with certain high-cost devices were not always being accurately reported and included in the calculation of relative payment weights for the associated procedures. In this proposed rule, we do not believe that it is necessary to continue to apply the more specific device-dependent APC ratesetting methodology to ensure accurate ratesetting for the 10 APCs that are not included in the comprehensive APCs proposal because hospitals now have had several years of experience reporting procedures involving implantable devices and have grown accustomed to ensuring that they code and report charges so that their claims fully and appropriately reflect the costs of those devices. Therefore, we believe that it is possible to calculate the payment rates for these APCs using our standard APC ratesetting methodology.Start Printed Page 43557

Beginning in CY 2014, we also are proposing to no longer implement procedure-to-device edits and device-to-procedure edits for any APCs. Under this proposal, hospitals would still be expected to adhere to the guidelines of correct coding and append the correct device code to the claim when applicable. However, claims would no longer be returned to providers when specific procedure and device code pairings do not appear on a claim. We believe that this is appropriate because of the experience hospitals now have had in coding and reporting these claims fully and because, for the more costly devices, the proposed comprehensive APCs would reliably reflect the cost of the device if it is included anywhere on the claim. Therefore, we do not believe that the burden on hospitals of adhering to the procedure-to-device edits and device-to-procedure edits, and the burden on the Medicare program of maintaining those edits, continue to be warranted. As with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately, regardless of whether there are claims processing edits in place.

Table 5—APCs Currently Recognized as Device-Dependent APCs

APC

APC Title

0039*

Level I Implantation of Neurostimulator Generator.

0040*

Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.

Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing.

0656*

Transcatheter Placement of Intracoronary Drug-Eluting Stents.

0674*

Prostate Cryoablation.

0680*

Insertion of Patient Activated Event Recorders.

0687

Revision/Removal of Neurostimulator Electrodes.

*Denotes proposed comprehensive APC.

(2) Blood and Blood Products

Since the implementation of the OPPS in August 2000, we have made separate payments for blood and blood products through APCs rather than packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood products, as well as for the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs.

For CY 2014, we are proposing to continue to establish payment rates for blood and blood products using our blood-specific CCR methodology, which utilizes actual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has been our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a significant difference in CCRs for those hospitals with and without blood-specific cost centers, and past public comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimation of the true hospital costs for blood and blood products. Specifically, in order to address the differences in CCRs and to better reflect hospitals' costs, we are proposing to continue to simulate blood CCRs for each hospital that does not report a blood cost center by calculating the ratio Start Printed Page 43558of the blood-specific CCRs to hospitals' overall CCRs for those hospitals that do report costs and charges for blood cost centers. We would then apply this mean ratio to the overall CCRs of hospitals not reporting costs and charges for blood cost centers on their cost reports in order to simulate blood-specific CCRs for those hospitals. We calculated the costs upon which the proposed CY 2014 payment rates for blood and blood products are based using the actual blood-specific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

We continue to believe the hospital-specific, blood-specific CCR methodology best responds to the absence of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we believe that it yields more accurate estimated costs for these products. We continue to believe that this methodology in CY 2014 would result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general.

We note that, as discussed in section II.A.2.e. of this proposed rule, we are proposing comprehensive APCs that would provide all-inclusive payments for certain device-dependent procedures. Under this proposal, we would include the costs of blood and blood products when calculating the overall costs of these comprehensive APCs. We note that we would continue to apply the blood-specific CCR methodology described in this section when calculating the costs of the blood and blood products that appear on claims with services assigned to the comprehensive APCs. Because the costs of blood and blood products would be reflected in the overall costs of the comprehensive APCs (and, as a result, in the payment rates of the comprehensive APCs), we would not make separate payments for blood and blood products when they appear on the same claims as services assigned to the comprehensive APCs.

We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed CY 2014 payment rates for blood and blood products (which are identified with status indicator “R”). For a more detailed discussion of the blood-specific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810).

e. Proposed Establishment of Comprehensive APCs

(1) Definition and General Principles

During the initial development of a proposal for an outpatient prospective payment system in 1998 (63 FR 47552 through 48036), we considered developing the payment system based on a comprehensive outpatient bundle, as opposed to on a HCPCS component level. In 2000, we implemented an OPPS based generally on making payments at the HCPCS level (65 FR 18434 through 18820). Since then, however, we have been steadily moving the OPPS towards a more comprehensive approach that increases flexibility and opportunity for efficiencies in a prospective system.

For CY 2014, we are proposing to create 29 comprehensive APCs to replace 29 existing device-dependent APCs. We are proposing to define a comprehensive APC as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. Because a comprehensive APC would treat all individually reported codes as representing components of the comprehensive service, our proposal is to make a single prospective payment based on the cost of all individually reported codes that represent the provision of a primary service and all adjunctive services provided to support that delivery of the primary service. Specifically, we are proposing to create comprehensive APCs for the 29 most costly device-dependent services, where the cost of the device is large compared to the other costs that contribute to the cost of delivering the primary service.

We believe that, under the authority of sections 1833(t)(1) and (t)(2) of the Act, the Secretary has the discretion to establish comprehensive APCs as part of developing the OPPS classification system, and that this proposal furthers our ongoing efforts to move the OPPS towards a more comprehensive payment system in support of our objectives to increase flexibility and efficiencies.

The OPPS data we have accumulated over the past decade have enabled us to continue to address several longstanding goals, including: Continuing to improve the validity of our payments to most accurately reflect costs; improving transparency and reducing complexity and administrative burden whenever possible; and increasing flexibility for hospitals to develop increased efficiencies in the delivery of quality care.

We believe this proposal to establish comprehensive APCs will improve our ability to accurately set payment rates. In the normal process of setting payment rates, costs in certain cost centers (“uncoded costs”) are added to the costs of services reported with specific HCPCS codes only when they can be reliably assigned to a single service. Under the proposal, the entire claim would be associated with a single comprehensive service so all costs reported on the claim may be reliably assigned to that service. This increases the accuracy of the payment for the comprehensive service and also increases the stability of the payment from year to year. As an example, room and board revenue center charges are not included in OPPS rate setting calculations because room and board is typically not separately charged for outpatient services. In the case of these 29 device-dependent procedures, the patient typically stays overnight to recover from the procedure. Thus, for these 29 comprehensive services, the cost of the room, nutrition (board) and nursing care that is required to sustain the patient while the comprehensive device-dependent service is delivered will be associated with the service even if the hospital reports the costs in room and board revenue codes that are not usually used to report outpatient procedure costs.

We also believe our proposal will enhance beneficiary understanding and transparency. Typically beneficiaries understand the primary procedure to be the OPPS service they receive, and do not generally consider that the other HCPCS codes are separate services. For example, beneficiaries think of a single service such as “getting my gall bladder removed” or “getting a pacemaker.” We believe that defining certain services within the OPPS in terms of a single comprehensive service delivered to the beneficiary improves transparency for the beneficiary, for physicians, and for hospitals by creating a common reference point with a similar meaning for all three groups and using the comprehensive service concept that already identifies these same services when they are performed in an inpatient environment.

Finally, we believe that larger bundles that contain a wider mix of related services in the prospectively paid bundles increase the opportunities for Start Printed Page 43559providers to tailor services to the specific needs of individual beneficiaries, thereby increasing the opportunities for efficiencies and improving the delivery of medical care.

(2) Comprehensive APCs for Device-Dependent Services

(a) Identification of High-Cost Device-Dependent Procedures

In order to identify those services for which comprehensive packaging would have the greatest impact on cost validity, payment accuracy, beneficiary transparency, and hospital efficiency, we ranked all APCs by CY 2012 costs and then identified 29 device-dependent APCs where we believe that the device-dependent APC is characterized by a costly primary service with relatively small cost contributions from adjunctive services.

For CY 2014, we are proposing to create 29 comprehensive APCs to prospectively pay for device-dependent services associated with 136 HCPCS codes. We are proposing to base the single all-inclusive comprehensive APC payment on all charges on the claim, excluding only charges that cannot be covered by Medicare Part B or that are not payable under the OPPS. This comprehensive APC payment would include, for example, payment for the following types of services.

• Inclusion of Otherwise Packaged Services and Supplies

As part of the comprehensive APC, we are proposing to package all services that are packaged in CY 2013, and all services proposed for unconditional or conditional packaging for CY 2014.

• Inclusion of Adjunctive Services

We have previously noted in section II.A.3.a. of this proposed rule that it has been a goal of the OPPS to package services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service. We are proposing to package into the comprehensive APCs all these integral, ancillary, supportive, dependent, and adjunctive services, hereinafter collectively referred to as “adjunctive services,” provided during the delivery of the comprehensive service. This includes the diagnostic procedures, laboratory tests and other diagnostic tests, and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; uncoded services and supplies used during the service; outpatient department services delivered by therapists as part of the comprehensive service; durable medical equipment as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other components reported by HCPCS codes that are provided during the comprehensive service, except for mammography services and ambulance services, which are never payable as OPD services in accordance with section 1833(t)(1)(B)(iv) of the Act.

As part of the comprehensive service packaging proposal described above, we are proposing to package all devices; implantable durable medical equipment (DME); implantable prosthetics; DME, prosthetics, and orthotics when used as supplies in the delivery of the comprehensive service; and supplies used in support of these items when these items or supplies are provided as part of the delivery of a comprehensive service. We have a longstanding policy of providing payment under the OPPS for implantable DME, implantable prosthetics, and medical and surgical supplies, as provided at sections 1833(t)(1)(B)(i) and(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). Under this proposal, DME, prosthetics, and orthotics, when used as supplies in the delivery of the comprehensive service, would be covered OPD services as provided under section 1833(t)(1)(B)(i) of the Act and 42 CFR 419.2(b)(4). Under this proposal, we believe that when such items and services are provided as adjunctive components in the delivery of a comprehensive service, such items are appropriate for coverage under the OPPS as covered OPD services, and for payment under the OPPS. We note that, at other times, such items when not provided as adjunctive components in the delivery of a comprehensive service would not constitute covered OPD services, and such items would be appropriately provided by suppliers and paid for under the DMEPOS benefit. More specifically, we do not believe that this proposed policy limits a hospital's ability to function as a DMEPOS supplier and bill DMEPOS items to the DME-MAC when those items are unrelated to the outpatient procedure and provided outside of the delivery of the comprehensive service.

In summary, we are proposing to consider all DMEPOS items to be covered OPD services and to be adjunctive to the primary service when they are delivered during the comprehensive service, as described above, and, therefore, are proposing to package such items into the applicable comprehensive service. This proposal includes any items described by codes that are otherwise covered and paid separately in accordance with the payment rules for DMEPOS items and services, and applies to those items when they are provided as part of the delivery of the comprehensive service. Under this proposal, when such items are provided during the delivery of a comprehensive service, we are proposing that they are covered OPD services as provided under sections 1833(t)(1)(B)(i) and (iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11), and payable under the OPPS, as described above.

• Inclusion of OPD Services Reported by Therapy Codes

Generally, section 1833(t)(1)(B)(4) of the Act excludes therapy services from the OPPS. We have previously noted that therapy services are those provided by therapists under a plan of care, and are paid under section 1834(k) of the Act subject to an annual therapy cap, when applied. However, certain other activities similar to therapy services are considered and paid as outpatient services. Although some adjunctive services may be provided by therapists and reported with therapy codes, we do not believe they always constitute therapy services. In the case of adjunctive components of a comprehensive service that are described by codes that would, under other circumstances, be indicative of therapy services, we note that there are a number of factors that would more appropriately identify them as OPD services. They are not independent services but are delivered as an integral part of the OPD service on the order of the physician who is providing the service; they are not typically provided under an established plan of care but on a direct physician order; they may be performed by nontherapists; and they frequently do not contribute to a rehabilitative process. For example, we note that therapists might be asked to provide a detailed documentation of patient weaknesses to be used by the physician to help identify or quantify a possible procedure-associated stroke or help with the mobilization of the patient after surgery in order to prevent blood clots. We note that these nontherapy services furnished by a therapist are limited to the immediate perioperative period, consistent with their inclusion as part of the larger service to deliver the device, and are distinct from Start Printed Page 43560subsequent therapy services furnished under a therapy plan of care which serve to establish rehabilitative needs and begin the process of rehabilitation.

For that reason, when provided within this very limited context of a comprehensive service such as the implantation of an expensive device, we are proposing that services reported by therapy HCPCS codes, including costs associated with revenue codes 042X, 043X and 044X, would be considered to be adjunctive OPD services in support of the primary service when those services occur within the peri-operative period; that is, during the delivery of this comprehensive service that is bracketed by the OPD registration to initiate the service and the OPD discharge at the conclusion of the service. They do not constitute therapy services provided under a plan of care, are not subject to a therapy cap, if applied, and are not paid separately as therapy services.

• Inclusion of Additional Hospital Room and Board Revenue Centers in the Calculation of Covered Costs

We believe that the cost of the bed and room occupied by the patient, the cost of nursing services, and the cost of any necessary fluid and nutrition (board) are considered covered costs when incurred during the provision of an OPD service, that is, during the provision of the comprehensive service. Because we are able to assign all costs on the claim to the comprehensive service, we believe we have an opportunity to better capture costs by including these costs in our calculations even when they appear in certain revenue centers not usually used to report OPPS costs. Specifically, we are including costs reported with room, board, and nursing revenue codes 012X, 013x, 015X, 0160, 0169, 0200 through 0204, 0206 through 0209, 0210 through 0212, 0214, 0219, 0230 through 0234, 0239, 0240 through 0243, and 0249, as we believe these revenue centers are sometimes associated with the costs of room, nutrition, and nursing care provided during these comprehensive services.

• Inclusion of Hospital-Administered Drugs

We also are proposing to package all drugs provided to the beneficiary as part of the delivery of the comprehensive service except for those drugs separately paid through a transitional pass through payment. Intravenous drugs, for example, are OPPS services that are considered adjunctive to the primary procedure because the correct administration of the drug either promotes a beneficial outcome, such as the use of intravenous pain medications, or prevents possible complications, such as the use of intravenous blood pressure medications to temporarily replace oral blood pressure medications and reduce the risk of a sudden rise in blood pressure when a normal daily medication is stopped. We note that, in defining these packaged drugs, we are applying both our existing definitions of self-administered drugs (SADs) and our existing definition of drugs as supplies to the situation where the OPD service is a comprehensive service.

We are proposing that all medications provided by the hospital for delivery during a comprehensive service pursuant to a physician order, regardless of the route of administration, would be considered to be adjunctive supplies and therefore packaged as part of the comprehensive APC. We believe that the physician order demonstrates that the delivery of the medication by the hospital is necessary to avoid possible complications during the delivery of the comprehensive service, to ensure patient safety, and to ensure that the comprehensive service delivery is not compromised, and therefore the medication should be considered an adjunctive supply.

Therefore, we are proposing to consider all medications to be supplies that are adjunctive to the primary service if the medicines are ordered by the physician and supplied and delivered by the hospital for administration during the comprehensive service.

(c) Methodology

We calculated the proposed relative payment weights for these device-dependent comprehensive APCs by using relative costs derived from our standard process as described earlier in section II.A. of this proposed rule. Specifically, after converting charges to costs on the claims, we identified all claims containing one of the 136 HCPCS-defined procedures specified as constituting a comprehensive service. These claims were, by definition, classified as single major procedure claims. Any claims that contained more than one of these procedures were identified but were included in calculating the cost of the procedure that had the greatest cost when traditional HCPCS level accounting was applied. All other costs were summed to calculate the total cost of the comprehensive service, and statistics for those services were calculated in the usual manner. Claims with extreme costs were excluded in accordance with our usual process.

(d) Payments

We used the proposed relative payment weights of these device-dependent comprehensive services to calculate proposed payments following our standard methodology. The proposed payments for the HCPCS codes assigned to these proposed comprehensive APCs are included in Addendum B of this proposed rule (which is available via the Internet on the CMS Web site). We are proposing to assign a new status indicator, “J1” (OPD services paid through a comprehensive APC), to these device-dependent procedures. The claims processing system would be configured to make a single payment for the device-dependent comprehensive service whenever a HCPCS for one of these primary procedures appears on the claim. From a processing system perspective, all other adjunctive services except mammography, ambulance, and pass-through services would be conditionally packaged when a comprehensive service is identified on a claim. From our data, we have determined that multiple primary HCPCS codes occur together in 24 percent of these device-dependent claims but only rarely represent unrelated services. Having determined that having multiple unrelated device-dependent services is an uncommon event, we are proposing to pay only the largest comprehensive payment associated with a claim. However, the costs of all of these more extensive or additional services are included in the calculations of the relative payment weights for the comprehensive service, so the prospective payment includes payment for these occurrences.

• Impact on Medicare Payments

Because these proposed device-dependent comprehensive APCs are entirely derived from existing services currently reported in Medicare claims, the proposed policy is effectively budget neutral in its impact on Medicare payments. We note that room, board, and nursing services have been covered costs in the delivery of outpatient services that require the patient to receive nursing services, occupy a bed for outpatient care, and maintain a controlled metabolic intake during a prolonged outpatient stay. Although we are including new revenue center costs for room and board when reported on these claims, we are including them to increase the accuracy of reporting not because they represent a new cost.Start Printed Page 43561

• Impact on APCs

Impact on Composite APCs. There is currently one device-dependent composite service in the OPPS, Cardiac Resynchronization Therapy, assigned to APC 0108. Because a comprehensive APC would treat all individually reported codes as representing components of the comprehensive service, all of the elements of the composite service are included in the proposed new comprehensive service. Therefore, Cardiac Resynchronization Therapy would no longer be identified as a composite service but would be identified as a comprehensive service. All services currently assigned to APC 0108, including Cardiac Resynchronization Therapy, would be assigned to the proposed new comprehensive APC, with the proposed payment for CY 2014 identified in Addendum B of this proposed rule (which is available via the Internet on the CMS Web site).

Impact on Claims Used to Calculate Other APCs. Some costs reported on claims for device-dependent procedures may no longer be available to contribute to the calculations for other services through the pseudo-single process, described in section II.A. of this proposed rule. However, the loss of usable cost data for these services would be small because most of these services currently cannot be isolated as the “single services” that can be used in the cost calculation process. The exceptions are services such as EKGs and chest x-rays that occur in very high frequency across all types of encounters, and laboratory services and drugs, neither of which are calculated based on average cost. Finally, it is important to note that any loss is a small impact when compared against the 400,000 new claims that could now be used because of the establishment of the proposed comprehensive APC.

Impact on Device-Dependent APCs. The impact on current device-dependent APCs is described above in section II.A.2.d.(1) of this proposed rule. Comprehensive APC costs exceed the device-dependent procedure costs by an average of 11 percent, less than $1,000 per claim. The direct cost contribution of other OPPS services accounts for most of this increase, with laboratory tests contributing approximately $18 per claim (a 0.1 percent increase) and other non-OPPS payments contributing an additional $18 per claim. There is significant variation across comprehensive APCs, however, not only because the distribution of supporting services varies but also because the larger bundle allows a more complete incorporation of uncoded costs. Finally, the use of comprehensive APCs would allow the number of claims used to estimate costs for these services to almost triple from 233,000 to 649,000, increasing the accuracy of our cost estimates.

• Impact on Beneficiary Payments

Under the proposed comprehensive service APCs, instead of paying copayments for a number of separate services that are generally, individually subject to the copayment liability cap at section 1833(t)(8)(C)(i) of the Act, beneficiaries could expect to pay only a single copayment that is subject to the cap. This would likely reduce beneficiary overall liability for most of these claims.

For CY 2014, we are proposing to create 29 comprehensive APCs to prospectively pay for device-dependent services associated with 136 HCPCS codes. We are proposing to treat all individually reported codes as representing components of the comprehensive service, making a single payment for the comprehensive service based on all charges on the claim, excluding only charges for services that cannot be covered by Medicare Part B or that are not payable under the OPPS. This would create a single all-inclusive payment for the claim that is subject to a single beneficiary copayment, up to the cap set at the level of the inpatient hospital deductible, as provided at section 1833(t)(8)(C)(i) of the Act.

Package all adjunctive services provided during the delivery of the comprehensive service.

Package room, board, and nursing costs necessary to deliver the outpatient service, regardless of whether or not the stay extends beyond a single calendar day.

Package all hospital-administered drugs pursuant to a physician order, excluding pass-through drugs that are required to be separately paid by statute.

Pay separately for mammography services and ambulance services as non-OPPS services, regardless of whether they are reported as part of a comprehensive service.

We are inviting public comment on this proposal.

f. Proposed Calculation of Composite APC Criteria-Based Costs

As discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide necessary, high quality care and as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Combining payment for multiple, independent services into a single OPPS payment in this way enables hospitals to manage their resources with maximum flexibility by monitoring and adjusting the volume and efficiency of services themselves. An additional advantage to the composite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, rather than relying upon single procedure claims which may be low in volume and/or incorrectly coded. Under the OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 through 66652) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background.

(a) Background

Beginning in CY 2008, we included composite APC 8002 (Level I Extended Assessment and Management Composite) and composite APC 8003 (Level II Extended Assessment and Management Composite) in the OPPS to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (an extended visit). In most of these circumstances, observation services are supportive and ancillary to the other services provided to a patient. From CY 2008 through CY 2013, in the circumstances when observation care is provided in conjunction with a high level visit, critical care, or direct referral and is an integral part of a patient's extended encounter of care, payment is made for the entire care encounter through one of the two composite APCs as appropriate. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 through 74165) for a full discussion of this longstanding policy for CY 2013 and prior years.

For CY 2014, we are proposing to modify our longstanding policy to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur. Primarily, we are proposing to allow any visit furnished by a hospital in conjunction with observation services of substantial duration to qualify for payment through the Extended Assessment and Management (EAM) Composite APC. Also, rather than recognizing two levels of EAM Composite APCs, we are proposing to create a new composite APC entitled, “Extended Assessment and Management (EAM) Composite,” (APC 8009) to provide payment for all qualifying extended assessment and management encounters. These proposals are discussed in greater detail below.

(b) Proposed Payment for Extended Assessment and Management Services

As discussed in section VII. of this proposed rule, we are proposing to no longer recognize five distinct visit levels for clinic visits and emergency department visits based on the existing HCPCS E/M codes, and instead recognize three new alphanumeric HCPCS codes for each visit type. Currently, the payment criteria for the EAM composite APCs 8002 and 8003 include a high level visit represented by HCPCS code 99205, 99215, 99284, 99285, or G0304; critical care represented by CPT code 99281; or direct referral represented by HCPCS code G0379 provided in conjunction with observation care represented by HCPCS code G0378. In light of the proposal to no longer differentiate visit payment levels, and the fact that the current high level visit codes (HCPCS codes 99205, 99215, 99284, 99285 and G0304) would no longer be recognized under the OPPS, it would no longer be feasible to continue with our current payment criteria for the EAM composite APCs 8002 and 8003 for CY 2014. Therefore, to ensure that we continue to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur, for CY 2014, we are proposing to provide payment for the entire care encounter through proposed new EAM Composite APC 8009 when observation care is provided in conjunction with a visit, critical care, or direct referral and is an integral part of a patient's extended encounter of care. Specifically, for CY 2014, we are proposing to provide EAM composite APC payment, through a newly created composite APC in circumstances when a clinic or ED visit, identified by one of the three new alphanumeric HCPCS codes proposed in section VII. of this proposed rule, is accompanied by observation care of substantial duration on a claim. We would no longer recognize APC 8002 or APC 8003. The specific criteria we are proposing to be met for the proposed new EAM composite APC to be paid is provided below in the description of the claims that we are proposing to select for the calculation of the proposed CY 2016 mean costs for this composite APC.

We are proposing to calculate the mean costs for the proposed new EAM composite APC (APC 8009) for CY 2014 using CY 2012 single and “pseudo” single procedure claims that meet each of the following criteria:

The claim does not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we assured that they would not contain a code for a service with status indicator “T” on the same date of service.);

The claim contains 8 or more units of HCPCS code G0378 (Observation services, per hour); and

The claim contains one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as G0378; or CPT code 99201 (Office or other outpatient visit for the evaluation and management of a new patient (Level 1)); CPT code 99202 (Office or other outpatient visit for the evaluation and management of a new patient (Level 2)); CPT code 99203 (Office or other outpatient visit for the evaluation and management of a new patient (Level 3)); CPT code 99204 (Office or other outpatient visit for the evaluation and management of a new patient (Level 4)); CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); CPT code 99211 (Office or other outpatient visit for the evaluation and management of an established patient (Level 1)); CPT code 99212 (Office or other outpatient visit for the evaluation and management of an established patient (Level 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and management of an established patient (Level 3)); CPT code 99214 (Office or other outpatient visit for the evaluation and management of an established patient (Level 4)); CPT code 99215 (Office or other outpatient visit for the evaluation and management of an established patient (Level 5)); CPT code 99281 (Emergency department visit for the evaluation and management of a patient (Level 1)); CPT code 99282 (Emergency department visit for the evaluation and management of a patient (Level 2)); CPT code 99283 (Emergency department visit for the evaluation and management of a patient (Level 3)); CPT code 99284 (Emergency department visit for the evaluation and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); or HCPCS code G0380 (Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B emergency department visit (Level 2)); HCPCS code G0382 (Type B emergency department visit (Level 3)); HCPCS code G0383 (Type B emergency department visit (Level 4)); HCPCS code G0384 (Type B emergency department visit (Level 5)); or CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

The proposed CY 2014 cost resulting from this methodology for the proposed new EAM composite APC (APC 8009) is approximately $1,357, which was calculated from 318,265 single and “pseudo” single claims that met the required criteria.

When hospital claims data for the CY 2014 proposed clinic and ED visit codes becomes available, we are proposing to Start Printed Page 43563calculate the mean costs for the proposed new EAM composite APC (APC 8009) for CY 2016 using CY 2014 single and “pseudo” single procedure claims that meet each of the following criteria:

The claims do not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By selecting these claims from single and “pseudo” single claims, we ensure that they would not contain a code for a service with status indicator “T” on the same date of service.);

The claims contain 8 or more units of HCPCS code G0378 (Observation services, per hour); and

The claims contain one of the following codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same date of service as G0378; or CPT code 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes); or newly proposed alphanumeric Level II HCPCS code GXXXA (Type A ED visit); newly proposed alphanumeric Level II HCPCS code GXXXB (Type B ED visit); or newly proposed alphanumeric Level II HCPCS code GXXXC (Clinic visit) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

LDR prostate brachytherapy is a treatment for prostate cancer in which hollow needles or catheters are inserted into the prostate, followed by permanent implantation of radioactive sources into the prostate through the needles/catheters. At least two CPT codes are used to report the composite treatment service because there are separate codes that describe placement of the needles/catheters and the application of the brachytherapy sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 (Interstitial radiation source application; complex), which are generally present together on claims for the same date of service in the same operative session. In order to base payment on claims for the most common clinical scenario, and to further our goal of providing payment under the OPPS for a larger bundle of component services provided in a single hospital encounter, beginning in CY 2008, we began providing a single payment for LDR prostate brachytherapy when the composite service, reported as CPT codes 55875 and 77778, is furnished in a single hospital encounter. We based the payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the cost derived from claims for the same date of service that contain both CPT codes 55875 and 77778 and that do not contain other separately paid codes that are not on the bypass list. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for a full history of OPPS payment for LDR prostate brachytherapy and a detailed description of how we developed the LDR prostate brachytherapy composite APC.

For CY 2014, we are proposing to continue to pay for LDR prostate brachytherapy services using the composite APC methodology proposed and implemented for CY 2008 through CY 2013. That is, we are proposing to use CY 2012 claims on which both CPT codes 55875 and 77778 were billed on the same date of service with no other separately paid procedure codes (other than those on the bypass list) to calculate the payment rate for composite APC 8001. Consistent with our CY 2008 through CY 2013 practice, we are proposing not to use the claims that meet these criteria in the calculation of the costs for APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We are proposing to continue to calculate the costs for APCs 0163 and 0651 using single and “pseudo” single procedure claims. We believe that this composite APC contributes to our goal of creating hospital incentives for efficiency and cost containment, while providing hospitals with the most flexibility to manage their resources. We also continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate cost upon which to base the composite APC payment rate.

Using a partial year of CY 2012 claims data available for this CY 2014 OPPS/ASC proposed rule, we were able to use 1,487 claims that contained both CPT codes 55875 and 77778 to calculate the cost upon which the proposed CY 2014 payment for composite APC 8001 is based. The proposed cost for composite APC 8001 for CY 2014 is approximately $4,340.

Effective January 1, 2008, we established APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation Composite) to pay for a composite service made up of at least one specified electrophysiologic evaluation service and one specified electrophysiologic ablation service. Correctly coded claims for these services often include multiple codes for component services that are reported with different CPT codes and that, prior to CY 2008, were always paid separately through different APCs (specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). Calculating a composite APC for these services allowed us to utilize many more claims than were available to establish the individual APC costs for these services, and advanced our stated goal of promoting hospital efficiency through larger payment bundles. In order to calculate the cost upon which the payment rate for composite APC 8000 is based, we used multiple procedure claims that contained at least one CPT code from Group A for evaluation services and at least one CPT code from Group B for ablation services reported on the same date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66656) identified the CPT codes that are assigned to Groups A and B. For a full discussion of how we identified the Group A and Group B procedures and established the payment rate for the cardiac electrophysiologic evaluation and ablation composite APC, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). Where a service in Group A is furnished on a date of service that is different from the date of service for a CPT code in Group B for the same beneficiary, payments are made under the appropriate single procedure APCs and the composite APC does not apply.

Subsequent to the publication of the CY 2013 OPPS/ASC proposed rule, the AMA's CPT Editorial Panel created five new CPT codes describing cardiac electrophysiologic evaluation and ablation services, effective January 1, 2013. These five new codes are:

CPT code 93653 (Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia Start Printed Page 43564with right atrial pacing and recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; with treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathway, accessory atrioventricular connection, cavo-tricuspid isthmus or other single atrial focus or source of atrial re-entry);

CPT code 93654 (Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; with treatment of ventricular tachycardia or focus of ventricular ectopy including intracardiac electrophysiologic 3D mapping, when performed, and left ventricular pacing and recording, when performed);

CPT code 93655 (Intracardiac catheter ablation of a discrete mechanism of arrhythmia which is distinct from the primary ablated mechanism, including repeat diagnostic maneuvers, to treat a spontaneous or induced arrhythmia (List separately in addition to code for primary procedure));

CPT code 93656 (Comprehensive electrophysiologic evaluation including transseptal catheterizations, insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with atrial recording and pacing, when possible, right ventricular pacing and recording, His bundle recording with intracardiac catheter ablation of arrhythmogenic focus, with treatment of atrial fibrillation by ablation by pulmonary vein isolation); and

CPT code 93657 (Additional linear or focal intracardiac catheter ablation of the left or right atrium for treatment of atrial fibrillation remaining after completion of pulmonary vein isolation (List separately in addition to code for primary procedure)).

As we described in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68425), new CPT codes 93653, 93654, and 93656 are primary electrophysiologic services that encompass evaluation as well as ablation, while new CPT codes 93655 and 93657 are add-on codes. Because CPT codes 93653, 93654, and 93656 already encompass both evaluation and ablation services, we assigned them to composite APC 8000 with no further requirement to have another electrophysiologic service from either Group A or Group B furnished on the same date of service, and we assigned them interim status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B to the CY 2013 OPPS/ASC final rule with comment period. To facilitate implementing this policy, we assigned CPT codes 93653, 93654, and 93656 to a new Group C, which is paid at the composite APC 8000 payment rate. (We noted that we will use single and “pseudo” single claims for CPT codes 93653, 93654, and 93656 when they become available for calculating the costs upon which the payment rate for APC 8000 will be based in future ratesetting.) Because CPT codes 93655 and 93657 are dependent services that may only be performed as ancillary services to the primary CPT codes 93653, 93654, and 93656, we believed that packaging CPT codes 93655 and 93657 with the primary procedures is appropriate, and we assigned them interim status indicator “N.” Because the CPT Editorial Panel deleted CPT codes 93651 and 93652, effective January 1, 2013, we deleted them from the Group B code list, leaving only CPT code 93650 (Intracardiac catheter ablation of atrioventricular node function, atrioventricular conduction for creation of complete heart block, with or without temporary pacemaker placement) in Group B.

As is our usual practice for new CPT codes that were not available at the time of the proposed rule, our treatment of new CPT codes 93653, 93654, 93655, 93656, and 93657 was open to public comment for a period of 60 days following the publication of the CY 2013 OPPS/ASC final rule with comment period.

For CY 2014, we are proposing to continue to pay for cardiac electrophysiologic evaluation and ablation services using the composite APC methodology proposed and implemented for CY 2008 through CY 2013. We also are proposing to continue the new Group C methodology we first established for CY 2013, described above, in response to the CPT Editorial Panel's creation of primary CPT codes 93653, 93654, and 93656. We continue to believe that the cost for cardiac electrophysiologic evaluation and ablation services calculated from a high volume of correctly coded multiple procedure claims would result in an accurate and appropriate proposed payment for these services when at least one evaluation service is furnished during the same clinical encounter as at least one ablation service. Consistent with our practice since CY 2008, we are proposing not to use the claims that met the composite payment criteria in the calculation of the costs for APC 0085, to which the CPT codes in both Groups A and B for composite APC 8000 are otherwise assigned. We are proposing that the costs for APC 0085 would continue to be calculated using single procedure claims. For CY 2014, using a partial year of CY 2012 claims data available for this CY 2014 OPPS/ASC proposed rule, we were able to use 15,817 claims containing a combination of Group A and Group B CPT codes (Group C was not effective until January 1, 2013) to calculate a proposed cost of approximately $13,402 for composite APC 8000.

Table 6—Proposed Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite APC 8000 Is Based

Codes Used in Combinations: At least one in Group A and one in Group B, or at least one in Group C

CY 2014 CPT Code

Proposed single code CY 2014 APC

Proposed CY 2014 SI (composite)

Group A

Comprehensive electrophysiologic evaluation with right atrial pacing and recording, right ventricular pacing and recording, His bundle recording, including insertion and repositioning of multiple electrode catheters, without induction or attempted induction of arrhythmia

93619

0085

Q3

Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of arrhythmia; with right atrial pacing and recording, right ventricular pacing and recording, His bundle recording

Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; with treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathway, accessory atrioventricular connection, cavo-tricuspid isthmus or other single atrial focus or source of atrial re-entry

93653

8000

Q3

Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and recording, right ventricular pacing and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; with treatment of ventricular tachycardia or focus of ventricular ectopy including intracardiac electrophysiologic 3D mapping, when performed, and left ventricular pacing and recording, when performed

93654

8000

Q3

Comprehensive electrophysiologic evaluation including transseptal catheterizations, insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with atrial recording and pacing, when possible, right ventricular pacing and recording, His bundle recording with intracardiac catheter ablation of arrhythmogenic focus, with treatment of atrial fibrillation by ablation by pulmonary vein isolation

93656

8000

Q3

(4) Mental Health Services Composite APC (APC 0034)

For CY 2104, we are proposing to continue our longstanding policy of limiting the aggregate payment for specified less resource-intensive mental health services furnished on the same date to the payment for a day of partial hospitalization services provided by a hospital, which we consider to be the most resource-intensive of all outpatient mental health treatments. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 to 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74168) for more recent background.

We are proposing that when the aggregate payment for specified mental health services provided by one hospital to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services exceeds the maximum per diem payment rate for partial hospitalization services provided by a hospital, those specified mental health services would be assigned to APC 0034 (Mental Health Services Composite). Specifically, we are proposing to continue to set the payment rate for APC 0034 at the same payment rate that we are proposing to establish for APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs), which is the maximum partial hospitalization per diem payment rate for a hospital and proposing that the hospital would continue to be paid one unit of APC 0034. Under this policy, the I/OCE would continue to determine whether to pay for these specified mental health services individually or to make a single payment at the same payment rate established for APC 0176 for all of the specified mental health services furnished by the hospital on that single date of service. We continue to believe that the costs associated with administering a partial hospitalization program represent the most resource-intensive of all outpatient mental health treatments. Therefore, we do not believe that we should pay more for mental health services under the OPPS than the highest partial hospitalization per diem payment rate for hospitals.

Effective January 1, 2009, we provide a single payment each time a hospital bills more than one imaging procedure within an imaging family on the same date of service, in order to reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session (73 FR 41448 through 41450). We utilize three imaging families based on imaging modality for purposes of this methodology: (1) Ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 6 of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68253 through 68257). Start Printed Page 43566

While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement under section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging services provided with and without contrast. While the ultrasound procedures included in the policy do not involve contrast, both CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five multiple imaging composite APCs established in CY 2009 are:

APC 8004 (Ultrasound Composite);

APC 8005 (CT and CTA without Contrast Composite);

APC 8006 (CT and CTA with Contrast Composite);

APC 8007 (MRI and MRA without Contrast Composite); and

APC 8008 (MRI and MRA with Contrast Composite).

We define the single imaging session for the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. For example, if the hospital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment for APC 8008, the “with contrast” composite APC.

We make a single payment for those imaging procedures that qualify for composite APC payment, as well as any packaged services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging procedures performed across families. For a full discussion of the development of the multiple imaging composite APC methodology, we refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68559 through 68569).

For CY 2014, we are proposing to continue to pay for all multiple imaging procedures within an imaging family performed on the same date of service using the multiple imaging composite APC payment methodology. We continue to believe that this policy would reflect and promote the efficiencies hospitals can achieve when performing multiple imaging procedures during a single session. The proposed CY 2014 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) are based on costs calculated from a partial year of CY 2012 claims available for this CY 2014 OPPS/ASC proposed rule that qualified for composite payment under the current policy (that is, those claims with more than one procedure within the same family on a single date of service). To calculate the proposed costs, we used the same methodology that we used to calculate the final CY 2012 and CY 2013 costs for these composite APCs, as described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74169). The imaging HCPCS codes referred to as “overlap bypass codes” that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC costs, pursuant to our established methodology (76 FR 74169), are identified by asterisks in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site) and are discussed in more detail in section II.A.1.b. of this proposed rule.

We were able to identify approximately 0.8 million “single session”' claims out of an estimated 1.5 million potential composite cases from our ratesetting claims data, more than half of all eligible claims, to calculate the proposed CY 2014 costs for the multiple imaging composite APCs.

Table 7 below lists the proposed HCPCS codes that would be subject to the multiple imaging composite policy and their respective families and approximate composite APC costs for CY 2014. We note that the proposed costs calculated for many imaging APCs, including the multiple imaging composite APCs, have changed significantly from the costs calculated for the CY 2013 OPPS/ASC final rule with comment period for these APCs as a result of the proposed adoption of the new MRI and CT cost centers, as discussed in section II.A.1.c. of this proposed rule.

* If a “without contrast” CT or CTA procedure is performed during the same session as a “with contrast” CT or CTA procedure, the I/OCE will assign APC 8006 rather than APC 8005.

Proposed CY 2014 APC 8007 (MRI and MRA without Contrast composite) *

Proposed CY 2014 approximate APC cost = $612

Family 3—MRI and MRA with and without Contrast

70336

Magnetic image, jaw joint.

70540

Mri orbit/face/neck w/o dye.

70544

Mr angiography head w/o dye.

70547

Mr angiography neck w/o dye.

70551

Mri brain w/o dye.

70554

Fmri brain by tech.

71550

Mri chest w/o dye.

72141

Mri neck spine w/o dye.

72146

Mri chest spine w/o dye.

72148

Mri lumbar spine w/o dye.

72195

Mri pelvis w/o dye.

73218

Mri upper extremity w/o dye.

73221

Mri joint upr extrem w/o dye.

73718

Mri lower extremity w/o dye.

73721

Mri jnt of lwr extre w/o dye.

74181

Mri abdomen w/o dye.

75557

Cardiac mri for morph.

75559

Cardiac mri w/stress img.

C8901

MRA w/o cont, abd.

C8904

MRI w/o cont, breast, uni.

C8907

MRI w/o cont, breast, bi.

C8910

MRA w/o cont, chest.

Start Printed Page 43568

C8913

MRA w/o cont, lwr ext.

C8919

MRA w/o cont, pelvis.

C8932

MRA, w/o dye, spinal canal.

C8935

MRA, w/o dye, upper extr.

Proposed CY 2014 APC 8008 (MRI and MRA with contrast composite)

Proposed CY 2014 approximate APC cost = $908

70549

Mr angiograph neck w/o&w/dye.

70542

Mri orbit/face/neck w/dye.

70543

Mri orbt/fac/nck w/o & w/dye.

70545

Mr angiography head w/dye.

70546

Mr angiograph head w/o&w/dye.

70547

Mr angiography neck w/o dye.

70548

Mr angiography neck w/dye.

70552

Mri brain w/dye.

70553

Mri brain w/o & w/dye.

71551

Mri chest w/dye.

71552

Mri chest w/o & w/dye.

72142

Mri neck spine w/dye.

72147

Mri chest spine w/dye.

72149

Mri lumbar spine w/dye.

72156

Mri neck spine w/o & w/dye.

72157

Mri chest spine w/o & w/dye.

72158

Mri lumbar spine w/o & w/dye.

72196

Mri pelvis w/dye.

72197

Mri pelvis w/o & w/dye.

73219

Mri upper extremity w/dye.

73220

Mri uppr extremity w/o&w/dye.

73222

Mri joint upr extrem w/dye.

73223

Mri joint upr extr w/o&w/dye.

73719

Mri lower extremity w/dye.

73720

Mri lwr extremity w/o&w/dye.

73722

Mri joint of lwr extr w/dye.

73723

Mri joint lwr extr w/o&w/dye.

74182

Mri abdomen w/dye.

74183

Mri abdomen w/o & w/dye.

75561

Cardiac mri for morph w/dye.

75563

Card mri w/stress img & dye.

C8900

MRA w/cont, abd.

C8902

MRA w/o fol w/cont, abd.

C8903

MRI w/cont, breast, uni.

C8905

MRI w/o fol w/cont, brst, un.

C8906

MRI w/cont, breast, bi.

C8908

MRI w/o fol w/cont, breast,.

C8909

MRA w/cont, chest.

C8911

MRA w/o fol w/cont, chest.

C8912

MRA w/cont, lwr ext.

C8914

MRA w/o fol w/cont, lwr ext.

C8918

MRA w/cont, pelvis.

C8920

MRA w/o fol w/cont, pelvis.

C8931

MRA, w/dye, spinal canal.

C8933

MRA, w/o&w/dye, spinal canal.

C8934

MRA, w/dye, upper extremity.

C8936

MRA, w/o&w/dye, upper extr.

* If a “without contrast” MRI or MRA procedure is performed during the same session as a “with contrast” MRI or MRA procedure, the I/OCE will assign APC 8008 rather than APC 8007.

3. Proposed Changes to Packaged Items and Services

a. Background

Like other prospective payment systems, the OPPS relies on the concept of averaging, where the payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. However, with the exception of outlier cases, overall payment is adequate to ensure access to appropriate care. The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services in the most efficient way by enabling hospitals to manage their resources with maximum flexibility, thereby encouraging long-term cost containment. Our packaging policies support our strategic goal of using larger payment bundles to maximize hospitals' incentives to provide care in the most efficient matter. In addition, the OPPS packages payment for multiple interrelated items and services into a single payment, regardless of whether dedicated CPT or HCPCS codes describe the services or the cost of the individual items and services. For example, where there are a variety of devices, drugs, items, supplies, etc. that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the most cost-efficient item that meets the patient's needs, rather than to routinely Start Printed Page 43569use a more expensive item, which often results if separate payment is provided for the items. This encourages hospitals that are spending more per case than the payment they received to review their service patterns to ensure that they furnish services as efficiently as possible. Similarly, we believe that separate payment for items and services heightens the hospital's focus on the payment for individual services, rather than the efficient delivery of those services.

Packaging also encourages hospitals to effectively negotiate with manufacturers and suppliers to reduce the purchase price of items and services or to explore alternative group purchasing arrangements, thereby encouraging the most economical health care delivery. Similarly, packaging encourages hospitals to establish protocols that ensure that necessary services are furnished, while scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the predictability and accuracy of payment for services over time. Finally, packaging may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and services and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency and is an essential component of a prospective payment system, packaging payment for items and services that are typically integral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000. Most, but not necessarily all, items and services currently packaged in the OPPS are listed in 42 CFR 419.2(b). For an extensive discussion of the history and background of the OPPS packaging policy, we refer readers to the CY 2008 OPPS/ASC proposed rule (72 FR 42628) and the CY 2008 OPPS/ASC final rule with comment period (72 FR 66580).

We use the term “dependent service” to refer to the HCPCS codes that represent services that are typically ancillary and supportive to a primary diagnostic or therapeutic modality. We use the term “primary service” to refer to the HCPCS codes that represent the primary therapeutic or diagnostic modality into which we package payment for the dependent service. Over the last decade, we have refined our understanding and implementation of the OPPS and have packaged numerous services that we originally paid as primary services, and as we consider the development of larger payment groups that more broadly reflect services provided in an encounter or episode of care, we may propose to expand these packaging policies as they apply to services that we may currently pay as primary services.

We assign status indicator “N” to those HCPCS codes of dependent services that we believe are always integral to the performance of the primary modality. Therefore, we always package their costs into the costs of the separately paid primary services with which they are billed. Services assigned to status indicator “N” are unconditionally packaged. The following description of the conditional packaging status indicators reflects our proposal to discontinue the use of status indicator “X,” which we discuss below. We assign status indicator “Q1” (STV-Packaged Codes), “Q2” (T-Packaged Codes), or “Q3” (Codes that may be paid through a composite APC) to each conditionally packaged HCPCS code. An STV-packaged code describes a HCPCS code whose payment is packaged with one or more separately paid primary services with the status indicator of “S,” “T,” or “V” furnished in the hospital outpatient encounter. A T-packaged code describes a code whose payment is only packaged with one or more separately paid surgical procedures with the status indicator of “T” that are provided during the hospital outpatient encounter. STV-packaged codes and T-packaged codes are paid separately in those uncommon cases when they do not meet their respective criteria for packaged payment. STV-packaged codes and T-packaged codes are conditionally packaged. We refer readers to the discussion of proposed CY 2014 OPPS payment status and comment indicators in section XI. of this proposed rule and Addendum D1, which is available via the Internet on the CMS Web site, for a complete listing of status indicators and the meaning of each status indicator.

Hospitals include HCPCS codes and charges for packaged services on their claims, and the estimated costs associated with those packaged services are then added to the costs of separately payable procedures on the same claims to establish prospective payment rates. We encourage hospitals to report all HCPCS codes that describe packaged services provided, unless the CPT Editorial Panel or CMS provides other specific guidance. The appropriateness of the OPPS payment rates depends on the quality and completeness of the claims data that hospitals submit for the services they furnish to Medicare beneficiaries.

In addition to the packaged items and services listed in 42 CFR 419.2(b), in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we adopted the packaging of payment for items and services in seven categories with the primary diagnostic or therapeutic modality to which we believe these items and services are typically ancillary and supportive. The seven categories are: (1) Guidance services; (2) image processing services; (3) intraoperative services; (4) imaging supervision and interpretation services; (5) diagnostic radiopharmaceuticals; (6) contrast media; and (7) observation services. We specifically chose these categories of HCPCS codes for packaging because we believe that the items and services described by the codes in these categories are typically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. In addition, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we packaged products described as implantable biologicals. As discussed below, we are proposing to add each of these categories of packaged items and services that were packaged beginning in CYs 2008 and 2009, along with newly proposed packaged items and services for CY 2014 as described below to the OPPS packaging regulation at § 419.2(b). Packaging under the OPPS also includes composite APCs, which are described in section II.A.2.f. of this proposed rule.

b. Basis for Proposed New Packaging Policies for CY 2014

As discussed above, the OPPS is a prospective payment system. It is not intended to be a fee schedule, in which separate payment is made for each coded line item. However, the OPPS is currently a prospective payment system that packages some items and services but not others. Payment for some items and services in the OPPS is according to the principles of a prospective payment system, while the payment for other items and services is more like that of a fee schedule. Our overarching goal is to make OPPS payments for all services paid under the OPPS more consistent with those of a prospective payment system and less like those of a per service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examine the payment for items and services provided in the OPPS to determine which OPPS services can be packaged to achieve the objective of Start Printed Page 43570advancing the OPPS as a prospective payment system.

Therefore, as we did in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we have examined the items and services currently provided under the OPPS, reviewing categories of integral, ancillary, supportive, dependent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment of the primary service they support. Specifically, we examined the HCPCS code definitions (including CPT code descriptors) to see whether there were categories of codes for which packaging would be appropriate according to existing OPPS packaging policies or a logical expansion of those existing OPPS packaging policies. In general, we are proposing to package the costs of selected HCPCS codes into payment for services reported with other HCPCS codes where we believe that one code reported an item or service that was integral, ancillary, supportive, dependent, or adjunctive to the provision of care that was reported by another HCPCS code. Below we discuss categories and classes of items and services that we are proposing to package beginning in CY 2014. In several cases, we are proposing that services be conditionally packaged so that if they are provided without other services, there will be a separate payment for the service. The proposed policies detailed below are not exhaustive, and we expect to continue to review the OPPS and consider additional packaging policies in the future.

c. Proposed New Packaging Policies for CY 2014

(1) Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure

In the OPPS, we currently unconditionally package the following six categories of drugs, biologicals, and radiopharmaceuticals (unless temporary pass-through status applies): (1) Those with per day costs at or below the packaging threshold (discussed further in section V.B.2. of this proposed rule); (2) diagnostic radiopharmaceuticals; (3) contrast agents; (4) anesthesia drugs; (5) drugs used as supplies according to § 419.2(b)(4)); and (6) implantable biologicals. For CY 2014, we reviewed all of the drugs, biologicals, and radiopharmaceuticals administered in the hospital outpatient setting to identify categories or classes of drugs, biologicals, and radiopharmaceuticals that either should be packaged according to existing packaging policies or should be packaged as a logical expansion of existing OPPS packaging policies for drugs, biologicals, and radiopharmaceuticals.

Currently, two of the categories of drugs, biologicals, and radiopharmaceuticals that are packaged in the OPPS (contrast agents and diagnostic radiopharmaceuticals) have a common characteristic—they both describe products that function as supplies that are used in a diagnostic test or procedure. Although in the past we identified these specific categories of drugs, biologicals, and radiopharmaceuticals as packaged after the expiration of pass-through status, we recognize that they actually represent subcategories of a broader category of drugs, biologicals, and radiopharmaceuticals that should be packaged in the OPPS according to OPPS packaging principles: drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. In particular, we are referring to drugs, biologicals, and radiopharmaceuticals that function as supplies as a part of a larger, more encompassing service or procedure, namely, the diagnostic test or procedure in which the drug, biological, or radiopharmaceutical is employed. Because diagnostic radiopharmaceuticals and contrast agents represent specific examples of a broader category of drugs, biologicals, or radiopharmaceuticals that may function as a supply that is integral and supportive to a diagnostic test or procedure, we are proposing to unconditionally package drugs, biologicals, and radiopharmaceuticals that function as a supply when used in a diagnostic test or procedure, except when the drug, biological, or radiopharmaceutical has pass-through status.

A diagnostic test or procedure is defined as any kind of test or procedure performed to aid in the diagnosis, detection, monitoring, or evaluation of a disease or condition. A diagnostic test or procedure also includes tests or procedures performed to determine which treatment option is optimal. A diagnostic test or procedure can have multiple purposes, but at least one purpose must be diagnostic. We are proposing to revise the regulations at § 419.2(b) to specify that any drugs, biologicals, and radiopharmaceuticals that function as supplies when used in diagnostic tests or procedures will be packaged as supplies in the OPPS, except when pass-through status applies. This proposed broader category of packaged drugs, biologicals, and radiopharmaceuticals includes the currently packaged categories of contrast agents and diagnostic radiopharmaceuticals when used in a diagnostic test or procedure. We have identified specific drugs that function as supplies when used in a diagnostic test or procedure that fall under this proposed packaging policy, and discuss these drugs below.

(a) Stress Agents

Our review of OPPS drugs identified pharmacologic stress agents (“stress agents”) as a class of drugs that is described by the proposed packaged category of drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. Stress agents are a class of drugs that are used in diagnostic tests to evaluate certain aspects of cardiac function. In many cases, these agents are used in patients who are unable to perform an exercise stress test, which typically precedes additional diagnostic testing. The primary diagnostic test in which these agents are used is myocardial perfusion imaging (MPI), which is the highest cost nuclear medicine procedure in the OPPS, with OPPS payments exceeding $800 million in CY 2012. Approximately 96 percent of MPI is billed with CPT code 78452. Stress agents include the following drugs described by these HCPCS codes: HCPCS codes J0152 (Injection, adenosine for diagnostic use, 30 mg); J1245 (Injection, dipyridamole, per 10 mg); J1250 (Injection, dobutamine hydrochloride, per 250 mg); and J2785 (Injection, regadenoson, 0.1 mg). For CY 2013, HCPCS codes J1245 and J1250 are packaged in the OPPS, and J0152 and J2785 are separately paid. OPPS payments for the two separately payable stress agents totaled approximately $111 million in CY 2012.

Beginning in CY 2014, we are proposing to package all stress agents that function as supplies into the diagnostic tests or procedures in which they are employed, consistent with the policy proposed above. The primary service in which stress agents are employed is MPI. MPI with stress encompasses the imaging service, the stress test, and either exercise to induce stress or the administration of a pharmacologic stress agent. The various combinations of items and services that constitute MPI with stress are depicted in the table below, which includes the CY 2013 separate payment rates versus the proposed CY 2014 packaged payment rate for MPI.Start Printed Page 43571

€ The stress test described by CPT code 93017 is proposed to be conditionally packaged as a result of the proposal described below to conditionally package ancillary services.

April 2013 ASP Drug Pricing File.

* 70 kg patient.

The proposed CY 2014 payment rate for MPI with the stress test, stress agent, and diagnostic radiopharmaceutical packaged into MPI is 14 percent higher than the sum of the CY 2013 payments for separately paid MPI, a separately paid stress test, and either of the two separately paid stress agents.

(b) Hexaminolevulinate Hydrochloride (Cysview®)—HCPCS Code C9275

Cysview is a drug for which pass-through status expired on December 31, 2012. Beginning in CY 2013, Cysview was unconditionally packaged in the OPPS as a contrast agent (77 FR 68364). The indications and usage of Cysview as listed in the FDA-approved label are as follows: “Cysview is an optical imaging agent indicated for use in the cystoscopic detection of non-muscle invasive papillary cancer of the bladder among patients suspected or known to have lesion(s) on the basis of a prior cystoscopy. Cysview is used with the Karl Storz D-Light C Photodynamic Diagnostic (PDD) system to perform cystoscopy with the blue light setting (Mode 2) as an adjunct to the white light setting (Mode 1).”

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 42672), we described contrast agents as follows: “Contrast agents are generally considered to be those substances introduced into or around a structure that, because of the differential absorption of x-rays, alteration of magnetic fields, or other effects of the contrast medium in comparison with surrounding tissues, permit visualization of the structure through an imaging modality. The use of certain contrast agents is generally associated with specific imaging modalities, including x-ray, computed tomography (CT), ultrasound, and magnetic resonance imaging (MRI), for purposes of diagnostic testing or treatment.”

Upon reexamining this description of contrast agents and considering our prior application of this description to specific compounds, we believe that contrast agents should include those compounds that are used with the imaging modalities x-ray, computed tomography (CT), ultrasound, magnetic resonance imaging (MRI), and other related modalities that could represent advancements of these modalities. Based on the indications and usage described above for Cysview, we do not believe that Cysview is best described as a contrast agent. Rather, we believe Cysview is more appropriately described as a drug used in a procedure to diagnose bladder cancer.

As discussed above, we are proposing a new policy to package all drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure. Cysview is a drug that functions as a supply when used in a diagnostic test or procedure for the purpose of the “detection of non-muscle invasive papillary cancer of the bladder.” Therefore, as a drug that functions as a supply when used in a diagnostic test or procedure, we are proposing to package Cysview for CY 2014 under the OPPS. Cysview is currently assigned to status indicator “N” for CY 2013, and under this proposal, the status indicator assignment of “N” would continue for CY 2014.

(2) Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure

Since the inception of the OPPS we have packaged medical devices, medical and surgical supplies, and surgical dressings into the related procedure under § 419.2(b)(4). Medical and surgical supplies are a broad category of items used in the hospital outpatient setting. Supplies is a large category of items that typically are either for single patient use or have a shorter life span in use than equipment. Supplies include not only minor, inexpensive, or commodity-type items but also include a wide range of products used in the hospital outpatient setting, including certain implantable medical devices. We consider implantable medical devices to be integral to, dependent on, and supportive to a surgical implantation procedure. For further discussion, we refer readers to the CY 2000 OPPS final rule (65 FR 18443 through 18444). Packaged supplies can include certain drugs, biologicals, and radiopharmaceuticals. Packaged supplies in the OPPS also include implantable biologicals, which are packaged because they function as implantable devices which, as noted above, are considered to be a type of supply in the OPPS. We refer readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634) for a more detailed discussion. We believe that the existing packaging policy for implantable biologicals represents an example of a broader category of drugs and biologicals that should be packaged in the OPPS according to longstanding regulations and existing policies: drugs and biologicals that function as supplies or devices in a surgical procedure. Therefore, beginning in the CY 2014 OPPS, we are proposing to unconditionally package all drugs and biologicals that function as supplies or devices in a surgical procedure, following the current policy that is applied to implantable biologicals.

A class of products that we treat as biologicals in the OPPS that is described by the proposed packaging category of drugs and biologicals that function as supplies or devices in a surgical procedure is skin substitutes. The term “skin substitutes” refers to a category of products that are most commonly used in outpatient settings for the treatment Start Printed Page 43572of diabetic foot ulcers and venous leg ulcers. Although the term “skin substitute” has been adopted to refer to this category of products in certain contexts, these products do not actually function like human skin that is grafted onto a wound; they are not a substitute for a skin graft. Instead, these products are various types of wound dressings that, through various mechanisms of action, stimulate the host to regenerate lost tissue and replace the wound with functional skin. We refer readers to the “Skin Substitutes for Treating Chronic Wounds Technology Assessment Report at ES-2” which is available on the AHRQ Web site at: http://www.ahrq.gov/​research/​findings/​ta/​skinsubs/​HCPR0610_​skinsubst-final.pdf. Currently, available skin substitutes are regulated by the FDA as either medical devices (and classified as wound dressings) or as human cell, tissue, and cellular and tissue-based products (HCT/Ps) under section 361 of the Public Health Service Act. The different skin substitutes are applied to a wound during a surgical procedure described by CPT codes in the range 15271 through 15278. To be properly performed, every surgical procedure in this CPT code range requires the use of at least one skin substitute product. These surgical procedures include preparation of the wound and application of the skin substitute product through suturing or various other techniques. Currently skin substitutes are separately paid in the OPPS as if they are biologicals according to the ASP methodology and are subject to the drug and biological packaging threshold.

Because a skin substitute must be used to perform any of the procedures described by a CPT code in the range 15271 through 15278, and conversely because it is the surgical procedure of treating the wound and applying a covering to the wound that is the independent service, skin substitute products serve as a necessary supply for these surgical repair procedures. In addition, many skin substitutes are classified by the FDA as wound dressings, which make them the same or similar to surgical dressings that are packaged under § 419.2(b)(4). Finally, implantable biological products are very similar to (and in some instances the same as) skin substitute products, except that the clinical applications for implantable biologicals are typically an internal surgery versus the application to a wound for a skin substitute. Some products had or have dual uses as both skin substitutes and implantable biologicals, which underscores the similarity of these sometimes overlapping classes of products. Implantable biologicals and skin substitutes both function as supplies or devices that are used in surgical procedures and, therefore, should be packaged with the surgical procedure in which the products are used. Since CY 2009, we have packaged implantable biologicals and we are proposing to package skin substitutes with their associated surgeries beginning in CY 2014. We see no reason to distinguish skin substitutes from implantable biologicals for OPPS packaging purposes based on the clinical application of individual products. Therefore, we are proposing to unconditionally package skin substitutes into their associated surgical procedures. Packaging payment for these skin substitutes into the APC payment for the related surgical procedures also would result in a total prospective payment that is more reflective of the average resource costs of the procedures because prices for these products vary significantly from product to product. Packaging these products also would promote more efficient resource use by hospitals and would be more consistent with the treatment of similar products under the OPPS. We are proposing to revise the regulations at § 419.2(b)(4) to include skin substitutes as an example of a packaged surgical supply. Pass-through status would still be available to new skin substitutes that meet the pass-through criteria. The skin substitute products that would be unconditionally packaged under this proposal and assigned to status indicator “N” for CY 2014 are listed in Addendum P of this CY 2014 OPPS/ASC proposed rule. The proposed payment for CPT codes 15271 through 15278, including the cost of the packaged skin substitutes, for CY 2014 are listed in Addendum B of this proposed rule. These addenda are available on the CMS Web site at: http://www.cms.hhs.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

(3) Clinical Diagnostic Laboratory Tests

Since the beginning of the OPPS, clinical diagnostic laboratory tests (laboratory tests) provided in the hospital outpatient setting have been separately paid to hospitals at Clinical Laboratory Fee Schedule (CLFS) rates (65 FR 18442). Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the hospital outpatient services that are paid under the OPPS. Under this authority, the Secretary excluded from the OPPS those services that are paid under fee schedules or other payment systems. As stated in the April 17, 2000 OPPS final rule with comment period: “Rather than duplicate existing payment systems that are effectively achieving consistency of payments across different service delivery sites, we proposed to exclude from the outpatient PPS those services furnished in a hospital outpatient setting that were already subject to an existing fee schedule or other prospectively determined payment rate” (65 FR 18442). Because payment rates for laboratory tests were based on the CLFS, laboratory tests are among the services excluded from the OPPS. We codified this policy at 42 CFR 419.22(l).

As discussed above, it is our intent to make the OPPS a more complete prospective payment system, and less of a fee schedule-type payment system that makes separate payment for each separately coded item. We have examined the services performed in the hospital outpatient setting to determine those services that we believe should be packaged in order to make the OPPS a more complete and robust prospective payment system. We were guided by our longstanding OPPS packaging principle of packaging the payment of items or services when they are provided along with primary services they support. Based on this approach, we believe that laboratory tests (other than molecular pathology tests, as discussed below) that are integral, ancillary, supportive, dependent, or adjunctive to the primary services provided in the hospital outpatient setting are services that should be packaged. Laboratory tests and their results support clinical decisionmaking for a broad spectrum of primary services provided in the hospital outpatient setting, including surgery and diagnostic evaluations. Therefore, except as discussed below for molecular pathology tests, we are proposing to package laboratory tests when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting. We are proposing that laboratory tests would be integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting when they are provided on the same date of service as the primary service and when they are ordered by the same practitioner who ordered the primary service. We would consider a laboratory test to be unrelated to a primary service and, thus, not part of this packaging policy when the laboratory test is the only service provided on that date of service or when the laboratory test is provided on the Start Printed Page 43573same date of service as the primary service but is ordered for a different purpose than the primary service by a practitioner different than the practitioner who ordered the primary service provided in the hospital outpatient setting. The laboratory tests not included in the packaging proposal would continue to be paid separately at CLFS rates when billed on a 14X bill type.

We are proposing an exception for molecular pathology tests described by CPT codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479 from this proposed packaging policy. We are not proposing that these services be packaged because we believe that these relatively new tests have a different pattern of clinical use, which may make them generally less tied to a primary service in the hospital outpatient setting than the more common and routine laboratory tests that we are proposing to package. As we gain more experience with these molecular pathology tests, we will consider if packaging in the OPPS would be appropriate for these types of tests.

In addition to the laboratory packaging policy proposals described above, we considered proposing an alternative laboratory packaging policy that would package those laboratory tests meeting the proposed policies above, but also include a dollar threshold policy similar to the approach we use for separately paid drugs and biologicals in the OPPS so that only laboratory tests (meeting the proposed standards above) with CLFS payment rates below a certain dollar threshold amount would be packaged. Under this alternative policy, tests meeting the proposed standards above, but for which the CLFS payment rates are above the threshold amount, would continue to be separately paid. We decided not to propose this alternative policy because, as discussed above in the background section, our packaging policies generally do not consider the cost of the individual items and services that are packaged, meaning that we package both inexpensive and expensive items according to OPPS packaging principles.

We recognize that the Medicare Part B deductible and coinsurance generally do not apply for laboratory tests paid to hospitals at CLFS rates, but that the deductible and coinsurance would apply to laboratory tests packaged into other services in the OPPS. The purpose of the laboratory packaging proposal is not to shift program costs onto beneficiaries, but to encourage greater efficiency by hospitals and the most economical delivery of medically necessary laboratory tests. We estimate that the combination of packaging laboratory tests into a wide array of primary services provided in the hospital outpatient setting combined with our long-standing methodology to adjust the copayment percentages to 20 percent as provided in section 1833(t)(3)(B)(ii) of the Act and as discussed in section II.I. of this proposed rule, and the limitation on the copayment amount for a procedure to the inpatient hospital deductible as set forth at section 1833(t)(8)(C)(i) of the Act would fully offset the financial impact on Medicare beneficiaries receiving laboratory tests that would be subject to the proposed packaging policy. Further, we believe that creating these larger bundles will result in a more efficient use of laboratory services when they are adjunctive to an outpatient service. In addition, to the extent that the coinsurance and deductible do not apply under the CLFS, they would continue not to apply for tests that are ordered, provided, and billed independently from a primary service as discussed above, or for molecular pathology tests. We are inviting public comments on the effect of packaging laboratory tests on beneficiary coinsurance.

The laboratory test codes that we are proposing to be packaged and assigned status indicator “N” for CY 2014 are listed in Addendum P of this proposed rule (which is available via the Internet on the CMS Web site. We are proposing to revise the regulation text at § 419.2(b) and § 419.22(l) to reflect this laboratory test packaging proposal.

(4) Procedures Described By Add-On Codes

Add-on codes describe procedures that are always performed in addition to a primary procedure. Add-on codes can be either CPT codes or Level II HCPCS codes. For example, the procedure described by CPT code 11001 is “Debridement of extensive eczematous or infected skin; each additional 10% of the body surface, or part thereof (list separately in addition to code for primary procedure).” This code is used for additional debridement beyond that described by the primary procedure code. Currently, add-on codes are treated like other codes in the OPPS. Add-on codes typically received separate payment based on an APC assignment, and are typically assigned status indicator “T.”

Procedures described by add-on codes represent an extension or continuation of a primary procedure, which means that they are typically supportive, dependent, or adjunctive to a primary surgical procedure. The parent code defines the purpose of the patient encounter and the add-on code typically describes additional incremental work, when the extent of the procedure encompasses a range rather than a single defined endpoint applicable to all patients. For example, add-on CPT code 11001 is used for each additional 10 percent of debridement. Therefore, according to longstanding OPPS packaging principles described above and the dependent nature and adjunctive characteristics of procedures described by add-on codes, we believe that such procedures should be packaged with the primary procedure. For CY 2014, we are proposing to unconditionally package all procedures described by add-on codes in the OPPS.

There is an additional benefit to packaging add-on codes—more accurate OPPS payment for procedures described by add-on codes. Currently, calculating mean costs for procedures described by add-on codes is problematic in the OPPS because we cannot determine which costs on a claim are attributable to the primary procedure and which costs are attributable to the add-on procedure. Furthermore, because we use single claims and “pseudo” single procedure claims for ratesetting, we generally must rely on incorrectly coded claims containing only the add-on code to calculate payment rates for add-on procedures. Claims containing only an add-on code are incorrectly coded because they should be reported with (or “added-on”) a primary procedure. Packaging the line item costs associated with an add-on code into the cost of the primary procedure will help address this ratesetting concern because the costs of the add-on code would be packaged into the primary procedure, and we would no longer have to calculate costs for add-on codes based on miscoded claims. In addition, packaging add-on codes would increase the number of single bills available for ratesetting for the primary procedures.

We are revising the regulations at § 419.2(b) to include the packaging of add-on codes. The specific add-on codes that we are proposing to be unconditionally packaged and assigned status indicator “N” for CY 2014 are listed in Addendum P of this proposed rule, which is available via the Internet on the CMS Web site.

(5) Ancillary Services (Status Indicator “X”)

Under the OPPS, we currently pay separately for certain ancillary services that are assigned to status indicator “X,” defined as “ancillary services.” Some Start Printed Page 43574other services that are ancillary to other services are currently packaged in the OPPS. Those ancillary services assigned status indicator “X” in the OPPS and paid separately are, by definition, ancillary relative to primary services provided in the OPPS and include many minor diagnostic tests that are typically performed with a primary service, although there are instances where such services are not always performed with a primary service and may be performed alone.

As mentioned above, our intent is that the OPPS be more of a prospective payment system through expanding packaging. Given that the longstanding OPPS policy is to package items and services that are integral, ancillary, supportive, dependent, or adjunctive to a primary service, we believe that these ancillary services, which are assigned status indicator “X,” should be packaged when they are performed with another service, but should continue to be separately paid when performed alone. This packaging approach is most consistent with a prospective payment system and the regulations at § 419.2(b) that packages ancillary services into primary services while preserving separate payment for those instances in which one of these services is provided alone (not with a separate primary service) to a hospital outpatient.

In summary, we are proposing to conditionally package all ancillary services that were previously assigned a status indicator of “X” and assign these services to status indicator “Q1” (packaged when provided with a service assigned a status indicator of “S,” “T,” or “V”). Status indicator “X” would be discontinued. To encourage maximum flexibility to beneficiaries across different sites of service, we are not proposing to conditionally package preventive services assigned to status indicator “X” and instead are proposing to change the status indicator for preventive services from the currently assigned status indicator “X” to status indicator “S.” The specific codes for procedures assigned to status indicator “X” that are proposed to be conditionally packaged and assigned to status indicator “Q1” for CY 2014 are listed in Addendum P of this proposed rule, which is available via the Internet on the CMS Web site.

(6) Diagnostic Tests on the Bypass List

For the CY 2013 OPPS, we implemented a bypass list to convert lines from multiple procedure claims into “pseudo” single procedure claims. We are proposing to continue developing “pseudo” single procedure claims using a bypass list for the CY 2014 OPPS, as discussed in section II.A.1.b. of this proposed rule. The bypass list of separately paid services is used to convert claims with multiple separately payable procedures, which are generally not used for ratesetting purposes, into claims with a single separately paid procedure that can be used for ratesetting. Services on the bypass list have limited associated packaged costs so they can be bypassed when assigning packaged costs on a claim to a separately paid procedure on the same claim.

As noted above, beginning in CY 2008, we packaged several diagnostic items and services including guidance services, image processing services, intraoperative services, imaging supervision and interpretation services, diagnostic radiopharmaceuticals, and contrast agents. In this proposed rule, we also are proposing to conditionally package several diagnostic items and services, including drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, ancillary services (many of which are diagnostic tests), and laboratory tests. We believe that the diagnostic tests on the bypass list share many of the characteristics with these other conditionally or unconditionally packaged or proposed packaged categories of items and services in that they are diagnostic and are integral, ancillary, supportive, dependent, or adjunctive to a primary service. Examples include a barium swallow test (CPT code 74220) and a visual field examination (CPT code 92081). Given the nature of these services, we are proposing to conditionally package these procedures. We recognize that some of these services are sometimes provided without other services and, therefore, they will continue to be separately paid in those circumstances.

We are proposing that these codes be assigned status indicator “Q1” beginning in the CY 2014 OPPS. Some of these diagnostic tests on the bypass list are currently assigned to status indicator “X” and, therefore, would be conditionally packaged under the proposed policy to conditionally package ancillary services currently assigned status indicator “X.” The only diagnostic codes on the bypass list affected by this proposal are currently assigned to status indicator “S.” The specific codes for the diagnostic tests on the bypass list that we are proposing to be conditionally packaged and assigned to status indicator “Q1” for CY 2014 are listed in Addendum P of this proposed rule, which is available via the Internet on the CMS Web site. Similar to our conditional packaging proposal for services previously assigned to status indicator “X,” we are not proposing to conditionally package preventive services that are diagnostic tests on the bypass list.

(7) Device Removal Procedures

Implantable devices frequently require removal or replacement due to wear, failure, recall, and infection, among others. Since the beginning of the OPPS, implantable devices have been packaged (either as supplies, implantable prosthetics, or implantable DME) into their associated procedures. Device removal is sometimes described by a code that may include repair or replacement. In other cases, device removal is described by a separate code that only describes removal of a device. Device removal procedures are frequently performed with procedures to repair or replace devices, although it is possible that device removal may occur without repair or replacement if the clinical indication for the device that was removed no longer exists. When a separately coded device removal procedure is performed with a separately coded device repair or replacement procedure, the device removal procedure actually represents a part of an overall procedure that is removal with repair or replacement of the device.

Given that a separately coded device removal that accompanies a device repair or replacement procedure represents a service that is integral and supportive to a primary service, we are proposing to conditionally package device removal codes when they are billed with other surgical procedures involving repair or replacement. We believe that this conditional packaging policy is appropriate under longstanding OPPS packaging principles because these device removal procedures are an integral and supportive step in a more comprehensive overall procedure. Furthermore, conditionally packaging these device removal procedures with the replacement or revision codes would be consistent with our packaging policies for other dependent services. The specific codes for the device removal procedures that we are proposing to be conditionally packaged and assigned to status indicator “Q2” for CY 2014 are listed in Addendum P of this proposed rule, which is available via the Internet on the CMS Web site.

d. Impact of the New Packaging Proposals

We have examined the proposed aggregate impact of making these proposed changes to packaging for CY Start Printed Page 435752014. Because the OPPS is a budget neutral payment system in which the amount of the relative payment weight in the system is annually adjusted for changes in expenditures created by changes in APC weights and codes (but is not currently adjusted based on estimated growth in service volume), the effects of the packaging changes that we are proposing would result in changes to scaled weights and, therefore, to the payment rates for all separately paid procedures. These proposed changes would result from shifts in mean costs as a result of increased packaging, changes in multiple procedure discounting patterns, and a higher weight scaler that is applied to all unscaled APC weights. Further, to properly budget neutralize the money that would previously have been paid through other payment systems, we have included those payments when performing OPPS budget neutrality calculations. We refer readers to section II.A.4. of this proposed rule for an explanation of the weight scaler for OPPS budget neutrality. In a budget neutral system, the monies previously paid for services that are now proposed to be packaged are not lost, but are redistributed to all other services. A higher weight scaler would increase payment rates relative to observed mean costs for independent services by redistributing the lost weight of packaged items that historically have been paid separately and the lost weight when the mean costs of independent services do not completely reflect the full incremental cost of the packaged services. The impact of this proposed change on proposed CY 2014 OPPS payments is discussed in section XXIII.A. of this proposed rule, and the impact on various classifications of hospitals is shown in Column 5 in Table 39 in that section.

We estimate that our CY 2014 packaging proposal would redistribute approximately 4 percent of the estimated CY 2013 base year expenditures under the OPPS. If the relative payment weight for a particular APC decreases as a result of the proposed packaging approach, the increased weight scaler may or may not result in a relative payment weight that is equal to or greater than the relative weight that would occur without the proposed packaging approach. In general, the packaging policies that we are proposing would have more effect on payment for some services than on payment for others because the dependent items and services that we are proposing for packaging are furnished more often with some independent services than with others. However, because of the amount of relative payment weight that would be redistributed by this proposal, there would be some impact on payments for all OPPS services whose rates are set based on relative payment weights, and the impact on any given hospital would vary based on the mix of services furnished by the hospital.

e. Clarification Regarding Supplies That Are Packaged in the OPPS

Under the regulations at § 419.2(b)(4), medical and surgical supplies and equipment are packaged in the OPPS. Supplies is a large category of items that typically are either for single patient use or have a shorter life span in use than equipment. Packaged supplies can include certain drugs, biologicals, and radiopharmaceuticals. The only supplies that are sometimes paid separately in the OPPS are prosthetic supplies under § 419.22(j), and if paid separately, they are paid according to the DMEPOS fee schedule. All other supplies are unconditionally packaged in the OPPS.

In our annual review of the OPPS for CY 2014, we discovered many supplies that should be packaged in the OPPS according to § 419.2(b)(4), but that are currently assigned to status indicator “A” and are separately paid in the hospital outpatient setting according to the DMEPOS fee schedule. For CY 2014, we are proposing to revise the status indicator for all supplies described by Level II HCPCS A-codes (except for prosthetic supplies) from status indicator “A” to “N,” so that these supplies would be unconditionally packaged as required by § 419.2(b)(4). The specific Level II HCPCS A-codes whose status indicator will be revised from “A” to “N” are listed in Addendum P of this CY 2014 OPPS/ASC proposed rule, which is available via the Internet on the CMS Web site.

In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68272), after consideration of public comments we received on the proposed rule, we clarified the regulatory language at § 419.2(b) to make explicit that the OPPS payments for the included costs of the nonexclusive list of items and services covered under the OPPS referred to in this paragraph are packaged into the payments for the related procedures or services with which such items and services are provided. In this proposed rule, we are proposing to further revise this regulation to add the packaging categories that were adopted in CYs 2008 and 2009 in addition to the new proposed policies described above. We also are proposing to make some further minor revisions and editorial clarifications to the existing language of § 419.2(b) to make it more clearly reflect current packaging policy. Finally, we are proposing to revise the list of services excluded from the OPPS at § 419.22.

g. Comment Solicitation on Increased Packaging for Imaging Services

We currently package several kinds of imaging services in the OPPS, including image guidance services, image processing services, intraoperative imaging, and imaging supervision and interpretation services. In addition, some imaging services are included in this year's proposal to conditionally package ancillary services and diagnostic tests on the bypass list. In addition to these imaging services that are either packaged or proposed to be packaged, we are contemplating a proposal for CY 2015 that would conditionally package all imaging services with any associated surgical procedures. Imaging services not provided with a surgical procedure would continue to either be separately paid according to a standard clinical APC or a composite APC. We are requesting public comments on this potential CY 2015 proposal.

h. Summary of CY 2014 Packaging Proposals

Beginning in CY 2014, we are proposing to unconditionally package or conditionally package the following items and services and to add them to the list of OPPS packaged items and services in § 419.2(b):

(1) Drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure;

(2) Drugs and biologicals that function as supplies or devices when used in a surgical procedure;

(3) Clinical diagnostic laboratory tests;

(4) Procedures described by add-on codes;

(5) Ancillary services (status indicator “X”);

(6) Diagnostic tests on the bypass list; and

(7) Device removal procedures.

We believe that each of the above proposed unconditionally or conditionally packaged categories of items or services is appropriate according to existing packaging policies or expansions of existing packaging policies. However, we recognize that Start Printed Page 43576decisions about packaging payment involve a balance between ensuring that payment is adequate to enable the hospital to provide quality care while establishing incentives for efficiency through larger units of payment. Therefore, we are inviting public comments regarding our packaging proposals for the CY 2014 OPPS.

The HCPCS codes that we are proposing to be packaged either unconditionally (for which we are proposing to assign status indicator “N”), or conditionally (for which we are proposing to assign status indicator “Q1” or “Q2”), for CY 2014 are displayed in both Addendum P and Addendum B of this proposed rule. The supporting documents for this proposed rule, including but not limited to the Addenda, are available at the CMS Web site at: http://www.cms.hhs.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

4. Proposed Calculation of OPPS Scaled Payment Weights

For CY 2014, we are proposing to calculate the relative payment weights for each APC for CY 2014 shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of this proposed rule. In years prior to CY 2007, we standardized all the relative payment weights to APC 0601 (Mid-Level Clinic Visit) because mid-level clinic visits were among the most frequently performed services in the hospital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the median cost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC.

Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the relative payment weights for APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of the clinic visit APCs. We selected APC 0606 as the base because APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five levels).

For the CY 2013 OPPS (77 FR 68283), we established a policy of using geometric mean-based APC costs to calculate relative payment weights. For the CY 2014 OPPS, we are proposing to continue basing the relative payment weights on which OPPS payments will be made by using geometric mean costs. As we discuss in section VII. of this proposed rule, we are proposing to reconfigure the CY 2014 visit APCs so that they would include a single level for each visit type. However, in an effort to maintain consistency in calculating unscaled weights that represent the cost of some of the most frequently provided services, we are proposing to use the cost of the clinic visit APC in calculating unscaled weights, which for CY 2014 is proposed APC 0634. While we have previously used APC 0606 as the base from which to develop the OPPS budget neutral weight scaler, under our proposal to reconfigure the visit APCs, we would have a single APC for each visit type. The proposal to reconfigure the visit APCs is discussed in more detail in section VII. of this proposed rule. Following our general methodology for establishing relative payment weights derived from APC costs, but using the proposed CY 2014 geometric mean cost for APC 0634, for CY 2014, we are proposing to assign APC 0634 a relative payment weight of 1.00 and to divide the geometric mean cost of each APC by the proposed geometric mean cost for APC 0634 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed relative payment weights for all other APCs does not affect the payments made under the OPPS because we scale the weights for budget neutrality.

Section 1833(t)(9)(B) of the Act requires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a budget neutral manner. Budget neutrality ensures that the estimated aggregate weight under the OPPS for CY 2014 is neither greater than nor less than the estimated aggregate weight that would have been made without the changes. To comply with this requirement concerning the APC changes, we are proposing to compare the estimated aggregate weight using the CY 2013 scaled relative payment weights to the estimated aggregate weight using the proposed CY 2014 unscaled relative payment weights.

For CY 2013, we multiplied the CY 2013 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2012 claims to calculate the total relative payment weight for each service. We then added together the total relative payment weight for each of these services in order to calculate an estimated aggregate weight for the year. For CY 2014, we are proposing the same process using the proposed CY 2014 unscaled relative payment weights rather than scaled relative payment weights. We are proposing to calculate the weight scaler by dividing the CY 2013 estimated aggregate weight by the proposed CY 2014 estimated aggregate weight. The service-mix is the same in the current and prospective years because we use the same set of claims for service volume in calculating the aggregate weight for each year. We note that, as a result of the CY 2014 proposed OPPS packaging policy for laboratory tests described in section II.A.3.b.(3) of this proposed rule, we would need to incorporate the estimated relative payment weights from those services. Therefore, the CY 2013 estimated OPPS aggregate weight would include payments for outpatient laboratory tests paid at the CLFS rates.

We are proposing to include estimated payments to CMHCs in our comparison of the estimated unscaled relative payment weights in CY 2014 to the estimated total relative payment weights in CY 2013 using CY 2012 claims data, holding all other components of the payment system constant to isolate changes in total weight. Based on this comparison, we adjusted the proposed CY 2014 unscaled relative payment weights for purposes of budget neutrality. The proposed CY 2014 unscaled relative payment weights were adjusted by multiplying them by a proposed weight scaler of 1.2143 to ensure that the proposed CY 2014 relative payment weights are budget neutral.

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the conversion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefore, the cost of those SCODs (as discussed in section V.B.3. of this proposed rule) is included in the proposed budget neutrality calculations for the CY 2014 OPPS.

The proposed CY 2014 unscaled relative payment weights listed in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) incorporate the proposed recalibration adjustments discussed in sections II.A.1. and II.A.2. of this proposed rule. Start Printed Page 43577

B. Proposed Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the conversion factor used to determine the payment rates under the OPPS on an annual basis by applying the OPD fee schedule increase factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase factor is equal to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of the Act. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572), consistent with current law, based on IHS Global Insight, Inc.'s first quarter 2013 forecast of the FY 2014 market basket increase, the proposed FY 2014 IPPS market basket update is 2.5 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iii) of the Act, as added by section 3401(i) of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of that law and further amended by section 1105(e) of the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), provide adjustments to the OPD fee schedule increase factor for CY 2014.

Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule increase factor under subparagraph (C)(iv) be reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572), we discussed the calculation of the proposed MFP adjustment for FY 2014, which is 0.4 percentage point.

We are proposing that if more recent data become subsequently available after the publication of this proposed rule (for example, a more recent estimate of the market basket increase and the MFP adjustment), we would use such data, if appropriate, to determine the CY 2014 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in the CY 2014 OPPS/ASC final rule with comment period.

In addition, section 1833(t)(3)(F)(ii) of the Act requires that for each of years 2010 through 2019, the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment described in section 1833(t)(3)(G) of the Act. For CY 2014, section 1833(t)(3)(G)(iii) of the Act provides a 0.3 percentage point reduction to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iii) of the Act, we are proposing to apply a 0.3 percentage point reduction to the OPD fee schedule increase factor for CY 2014.

We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 for a year, and may result in payment rates under the OPPS for a year being less than such payment rates for the preceding year. As described in further detail below, we are proposing to apply an OPD fee schedule increase factor of 1.8 percent for the CY 2014 OPPS (which is 2.5 percent, the proposed estimate of the hospital inpatient market basket percentage increase, less the proposed 0.4 percentage point MFP adjustment, and less the 0.3 percentage point additional adjustment).

We note that hospitals that fail to meet the Hospital OQR Program reporting requirements are subject to an additional reduction of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates for their services, as required by section 1833(t)(17) of the Act. As a result, those hospitals failing to meet the Hospital OQR Program reporting requirements would receive an OPD fee schedule increase factor of −0.2 percent (which is 2.5 percent, the proposed estimate of the hospital inpatient market basket percentage increase, less the proposed 0.4 percentage point MFP adjustment, less the 0.3 percentage point additional adjustment, and less 2.0 percentage points for the Hospital OQR Program reduction). For further discussion of the Hospital OQR Program, we refer readers to section XIII. of this proposed rule.

In this proposed rule, we are proposing to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (5) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2014, we reduce the OPD fee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(iii) of the Act, as required by section 1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by an additional 0.3 percentage point for CY 2014.

To set the OPPS conversion factor for CY 2014, we are proposing to increase the CY 2013 conversion factor of $71.313 by 1.8 percent. In accordance with section 1833(t)(9)(B) of the Act, we are proposing to further adjust the conversion factor for CY 2014 to ensure that any revisions made to the updates for a revised wage index and rural adjustment are made on a budget neutral basis. We are proposing to calculate an overall proposed budget neutrality factor of 1.004 for wage index changes by comparing proposed total estimated payments from our simulation model using the proposed FY 2014 IPPS wage indices to those payments using the current (FY 2013) IPPS wage indices, as adopted on a calendar year basis for the OPPS.

For CY 2014, we are not proposing to make a change to our rural adjustment policy, as discussed in section II.E. of this proposed rule. Therefore, the proposed budget neutrality factor for the rural adjustment is 1.0000.

For CY 2014, we are proposing to continue previously established policies for implementing the cancer hospital payment adjustment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this proposed rule. We are proposing to calculate a CY 2014 budget neutrality adjustment factor for the cancer hospital payment adjustment by comparing the estimated total CY 2014 payments under section 1833(t) of the Act, including the proposed CY 2014 cancer hospital payment adjustment, to the estimated CY 2014 total payments using the CY 2013 final cancer hospital payment adjustment as required under section 1833(t)(18)(B) of the Act. The difference in the CY 2014 estimated payments as a result of applying the proposed CY 2014 cancer hospital payment adjustment relative to the CY 2013 final cancer hospital payment adjustment has a limited impact on the budget neutrality calculation. Therefore, we are proposing to apply a proposed budget neutrality adjustment factor of 1.0001 to the conversion factor to ensure that the cancer hospital payment adjustment is budget neutral.

For this proposed rule, we estimate that pass-through spending for both drugs and biologicals and devices for CY 2014 would equal approximately $12 million, which represents 0.02 Start Printed Page 43578percent of total projected CY 2014 OPPS spending. Therefore, the proposed conversion factor also would be adjusted by the difference between the 0.15 percent estimate of pass-through spending for CY 2013 and the 0.02 percent estimate of CY 2014 pass-through spending, resulting in a proposed adjustment for CY 2014 of 0.13 percent. Finally, estimated payments for outliers would remain at 1.0 percent of total OPPS payments for CY 2014.

The proposed OPD fee schedule increase factor of 1.8 percent for CY 2014 (that is, the estimate of the hospital inpatient market basket percentage increase of 2.5 percent less the proposed 0.4 percentage point MFP adjustment and less the 0.3 percentage point required under section 1833(t)(3)(F) of the Act), the required proposed wage index budget neutrality adjustment of approximately 1.0004, the proposed cancer hospital payment adjustment of 1.0001, and the proposed adjustment of 0.13 percent of projected OPPS spending for the difference in the pass-through spending result in a proposed conversion factor for CY 2014 of $72.728.

Hospitals that fail to meet the reporting requirements of the Hospital OQR Program would continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates made for their services as required by section 1833(t)(17) of the Act. For a complete discussion of the Hospital OQR Program requirements and the payment reduction for hospitals that fail to meet those requirements, we refer readers to section XIII.G. of this proposed rule. To calculate the proposed CY 2014 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the Hospital OQR Program for the full CY 2014 payment update, we are proposing to make all other adjustments discussed above, but using a proposed reduced OPD fee schedule update factor of −0.2 percent (that is, the proposed OPD fee schedule increase factor of 1.8 percent further reduced by 2.0 percentage points as required by section 1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital OQR requirements). This results in a proposed reduced conversion factor for CY 2014 of $71.273 for those hospitals that fail to meet the Hospital OQR requirements (a difference of −$1.455 in the conversion factor relative to those hospitals that met the Hospital OQR requirements).

In summary, for CY 2014, we are proposing to use a conversion factor of $72.728 in the calculation of the national unadjusted payment rates for those items and services for which payment rates are calculated using geometric mean costs. We are proposing to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph (5) to reflect the reductions to the OPD fee schedule increase factor that are required for CY 2014 in order to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(iii) of the Act. We also are proposing to use a reduced conversion factor of $71.273 in the calculation of payments for hospitals that fail to comply with the Hospital OQR Program requirements to reflect the reduction to the OPD fee schedule increase factor that is required by section 1833(t)(17) of the Act.

C. Proposed Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to “determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner” (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is called the OPPS labor-related share. Budget neutrality is discussed in section II.B. of this proposed rule.

The OPPS labor-related share is 60 percent of the national OPPS payment. This labor-related share is based on a regression analysis that determined that, for all hospitals, approximately 60 percent of the costs of services paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we are not proposing to revise this policy for the CY 2014 OPPS. We refer readers to section II.H. of this proposed rule for a description and example of how the wage index for a particular hospital is used to determine the payment for the hospital. As discussed in section II.A.2.c. of this proposed rule, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same proposed FY 2014 pre-reclassified wage index that the IPPS uses to standardize costs. This standardization process removes the effects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and the copayment amount.

Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS wage index as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular acute care short-stay hospital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we believed that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). As discussed in that final rule with comment period, section 10324 of the Affordable Care Act added section 1886(d)(3)(E)(iii)(II) to the Act, which defines “frontier State,” and amended section 1833(t) of the Act to add new paragraph (19), which requires a “frontier State” wage index floor of 1.00 in certain cases, and states that the frontier State floor shall not be applied in a budget neutral manner. We codified these requirements in § 419.43(c)(2) and (c)(3) of our regulations. For the CY 2014 OPPS, we will implement this provision in the same manner as we did since CY 2011. That is, frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including reclassification, rural and imputed floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multicampus hospital systems, the HOPD would receive a wage index based on the geographic location of the specific inpatient hospital with which it is associated. Therefore, if the associated hospital is located in a frontier State, the wage index adjustment applicable for the hospital would also apply for the affiliated HOPD. We refer readers to the FY 2011, FY 2012, and FY 2013 IPPS/LTCH PPS final rules (75 FR 50160 through 50161, 76 FR 51793, 51795, and 51825, and 77 FR 53369 through 53370, respectively) and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27556 through 27557) for discussions Start Printed Page 43579regarding this provision, including our methodology for identifying which areas meet the definition of frontier States as provided for in section 1886(d)(3)(E)(iii)(II) of the Act.

In addition to the changes required by the Affordable Care Act, we note that the proposed FY 2014 IPPS wage indices continue to reflect a number of adjustments implemented over the past few years, including, but not limited to, reclassification of hospitals to different geographic areas, the rural and imputed floor provisions, an adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (the out-migration adjustment). We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552 through 27561) for a detailed discussion of all proposed changes to the FY 2014 IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed discussion of the history of these wage index adjustments as applied under the OPPS.

For purposes of the OPPS, we are proposing to continue our policy for CY 2014 of allowing non-IPPS hospitals paid under the OPPS to qualify for the out-migration adjustment if they are located in a section 505 out-migration county (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment. Table 4J listed in the FY 2014 IPPS/LTCH PPS proposed rule (available via the Internet on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​AcuteInpatientPPS/​index.html) identifies counties eligible for the out-migration adjustment and hospitals that would receive the adjustment for FY 2014. We also note that, beginning with FY 2012, under the IPPS, an eligible hospital that waives its Lugar status in order to receive the out-migration adjustment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the disproportionate share hospital (DSH) payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53371) for a more detailed discussion on the Lugar redesignation waiver for the out-migration adjustment. As we have done in prior years, we are including Table 4J from the FY 2014 IPPS/LTCH PPS proposed rule as Addendum L to this proposed rule with the addition of non-IPPS hospitals that would receive the section 505 out-migration adjustment under the CY 2014 OPPS. Addendum L is available via the Internet on the CMS Web site.

As discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27552 through 27553), the Office of Management and Budget (OMB) issued revisions to the current geographic area designations on February 28, 2013, that included a number of significant changes such as new CBSAs, urban counties that become rural, rural counties that become urban, and splitting existing CBSAs (OMB Bulletin 13-01. This bulletin can be found at: http://www.whitehouse.gov/​sites/​default/​files/​omb/​bulletins/​2013/​b13-01.pdf. All of these designations have corresponding effects on the wage index system and its adjustments. In order to allow for sufficient time to assess the new revisions and their ramifications, we intend to propose changes to the IPPS wage index based on the newest CBSA designations in the FY 2015 IPPS/LTCH PPS proposed rule. Similarly, in the OPPS, which uses the IPPS wage index, we intend to propose changes based on the new OMB revisions in the CY 2015 OPPS/ASC proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH PPS proposed rule.

As stated earlier in this section, we continue to believe that using the IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we are not proposing to change our current regulations which require that we use the FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014. With the exception of the proposed out-migration wage adjustment table (Addendum L to this proposed rule, which is available via the Internet on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we are not reprinting the proposed FY 2014 IPPS wage indices referenced in this discussion of the wage index. We refer readers to the CMS Web site for the OPPS at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html. At this link, readers will find a link to the proposed FY 2014 IPPS wage index tables.

D. Proposed Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calculated from the hospital's most recent cost report to determine outlier payments, payments for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. Medicare contractors cannot calculate a CCR for some hospitals because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital's Medicare contractor is able to calculate the hospital's actual CCR from its most recently submitted Medicare cost report. These hospitals include, but are not limited to, hospitals that are new, have not accepted assignment of an existing hospital's provider agreement, and have not yet submitted a cost report. CMS also uses the statewide average default CCRs to determine payments for hospitals that appear to have a biased CCR (that is, the CCR falls outside the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most recent cost report reflects an all-inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), Chapter 4, Section 10.11). In this proposed rule, we are proposing to update the default ratios for CY 2014 using the most recent cost report data. We discuss our policy for using default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation policy for cost reports beginning on or after January 1, 2009.

For CY 2014, we are proposing to continue to use our standard methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we use to adjust charges to costs on claims data for setting the proposed CY 2014 OPPS relative payment weights. Table 9 below lists the proposed CY 2014 default urban and rural CCRs by State and compares them to last year's default CCRs. These proposed CCRs represent the ratio of total costs to total charges for those cost centers relevant to outpatient services from each hospital's most recently submitted cost report, weighted by Medicare Part B charges. We also are proposing to adjust ratios from submitted cost reports to reflect the final settled status by applying the differential between settled to submitted overall CCRs for the cost centers relevant to outpatient services from the most recent pair of final settled and submitted cost reports. We then are Start Printed Page 43580proposing to weight each hospital's CCR by the volume of separately paid line-items on hospital claims corresponding to the year of the majority of cost reports used to calculate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating the statewide average default CCRs, including the hospitals used in our calculations and our trimming criteria.

For Maryland, we used an overall weighted average CCR for all hospitals in the Nation as a substitute for Maryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits the data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland because it takes into account each hospital's volume, rather than treating each hospital equally. We refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65822) for further discussion and the rationale for our longstanding policy of using the national average CCR for Maryland. In general, observed changes in the statewide average default CCRs between CY 2013 and CY 2014 are modest and the few significant changes are associated with areas that have a small number of hospitals.

Table 9 below lists the proposed statewide average default CCRs for OPPS services furnished on or after January 1, 2014.

Table 9—Proposed CY 2014 Statewide Average CCRs

State

Urban/rural

Proposed CY 2014
default CCR

Previous default CCR
(CY 2013 OPPS
final rule)

ALASKA

RURAL

0.472

0.489

ALASKA

URBAN

0.296

0.307

ALABAMA

RURAL

0.223

0.209

ALABAMA

URBAN

0.198

0.193

ARKANSAS

RURAL

0.227

0.219

ARKANSAS

URBAN

0.230

0.234

ARIZONA

RURAL

0.223

0.238

ARIZONA

URBAN

0.188

0.190

CALIFORNIA

RURAL

0.210

0.192

CALIFORNIA

URBAN

0.210

0.202

COLORADO

RURAL

0.396

0.331

COLORADO

URBAN

0.222

0.226

CONNECTICUT

RURAL

0.359

0.364

CONNECTICUT

URBAN

0.285

0.287

DISTRICT OF COLUMBIA

URBAN

0.282

0.302

DELAWARE

RURAL

0.278

0.282

DELAWARE

URBAN

0.331

0.353

FLORIDA

RURAL

0.172

0.182

FLORIDA

URBAN

0.166

0.167

GEORGIA

RURAL

0.271

0.237

GEORGIA

URBAN

0.209

0.214

HAWAII

RURAL

0.350

0.323

HAWAII

URBAN

0.311

0.306

IOWA

RURAL

0.312

0.296

IOWA

URBAN

0.284

0.269

IDAHO

RURAL

0.333

0.417

IDAHO

URBAN

0.491

0.357

ILLINOIS

RURAL

0.258

0.240

ILLINOIS

URBAN

0.235

0.230

INDIANA

RURAL

0.358

0.285

INDIANA

URBAN

0.288

0.256

KANSAS

RURAL

0.298

0.290

KANSAS

URBAN

0.245

0.210

KENTUCKY

RURAL

0.226

0.217

KENTUCKY

URBAN

0.232

0.241

LOUISIANA

RURAL

0.258

0.242

LOUISIANA

URBAN

0.229

0.225

MASSACHUSETTS

RURAL

0.436

0.427

MASSACHUSETTS

URBAN

0.330

0.323

MAINE

RURAL

0.443

0.445

MAINE

URBAN

0.455

0.449

MARYLAND

RURAL

0.286

0.275

MARYLAND

URBAN

0.251

0.246

MICHIGAN

RURAL

0.353

0.303

MICHIGAN

URBAN

0.316

0.303

MINNESOTA

RURAL

0.462

0.469

MINNESOTA

URBAN

0.339

0.321

MISSOURI

RURAL

0.282

0.241

MISSOURI

URBAN

0.287

0.262

MISSISSIPPI

RURAL

0.228

0.226

MISSISSIPPI

URBAN

0.187

0.182

MONTANA

RURAL

0.486

0.431

Start Printed Page 43581

MONTANA

URBAN

0.407

0.384

NORTH CAROLINA

RURAL

0.251

0.253

NORTH CAROLINA

URBAN

0.255

0.254

NORTH DAKOTA

RURAL

0.667

0.322

NORTH DAKOTA

URBAN

0.376

0.414

NEBRASKA

RURAL

0.333

0.318

NEBRASKA

URBAN

0.251

0.254

NEW HAMPSHIRE

RURAL

0.325

0.317

NEW HAMPSHIRE

URBAN

0.300

0.292

NEW JERSEY

URBAN

0.212

0.207

NEW MEXICO

RURAL

0.294

0.256

NEW MEXICO

URBAN

0.307

0.279

NEVADA

RURAL

0.234

0.234

NEVADA

URBAN

0.159

0.162

NEW YORK

RURAL

0.347

0.420

NEW YORK

URBAN

0.347

0.369

OHIO

RURAL

0.337

0.321

OHIO

URBAN

0.237

0.237

OKLAHOMA

RURAL

0.253

0.239

OKLAHOMA

URBAN

0.210

0.212

OREGON

RURAL

0.332

0.314

OREGON

URBAN

0.352

0.335

PENNSYLVANIA

RURAL

0.270

0.267

PENNSYLVANIA

URBAN

0.199

0.200

PUERTO RICO

URBAN

0.600

0.504

RHODE ISLAND

URBAN

0.310

0.264

SOUTH CAROLINA

RURAL

0.196

0.211

SOUTH CAROLINA

URBAN

0.210

0.214

SOUTH DAKOTA

RURAL

0.309

0.307

SOUTH DAKOTA

URBAN

0.208

0.218

TENNESSEE

RURAL

0.212

0.209

TENNESSEE

URBAN

0.200

0.195

TEXAS

RURAL

0.233

0.235

TEXAS

URBAN

0.203

0.206

UTAH

RURAL

0.343

0.374

UTAH

URBAN

0.338

0.359

VIRGINIA

RURAL

0.223

0.227

VIRGINIA

URBAN

0.243

0.237

VERMONT

RURAL

0.429

0.408

VERMONT

URBAN

0.395

0.384

WASHINGTON

RURAL

0.315

0.366

WASHINGTON

URBAN

0.322

0.301

WISCONSIN

RURAL

0.347

0.345

WISCONSIN

URBAN

0.308

0.307

WEST VIRGINIA

RURAL

0.294

0.277

WEST VIRGINIA

URBAN

0.327

0.338

WYOMING

RURAL

0.444

0.379

WYOMING

URBAN

0.279

0.301

ALASKA

RURAL

0.472

0.489

ALASKA

URBAN

0.296

0.307

E. Proposed Adjustment for Rural SCHs and EACHs Under Section 1833(t)(13)(B) of the Act

In the CY 2006 OPPS final rule with comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologicals, brachytherapy sources, and devices paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provided the Secretary the authority to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, and devices paid under the pass-through payment policy, in accordance with section 1833(t)(13)(B) of the Act.

In CY 2007, we became aware that we did not specifically address whether the adjustment applies to EACHs, which are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/Start Printed Page 43582ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) of the regulations to clarify that EACHs also are eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, three hospitals are classified as EACHs, and as of CY 1998, under section 4201(c) of Public Law 105-33, a hospital can no longer become newly classified as an EACH.

This adjustment for rural SCHs is budget neutral and applied before calculating outlier payments and copayments. We stated in the CY 2006 OPPS final rule with comment period (70 FR 68560) that we would not reestablish the adjustment amount on an annual basis, but we may review the adjustment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2013. Further, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment.

For the CY 2014 OPPS, we are proposing to continue our policy of a 7.1 percent payment adjustment that is done in a budget neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items paid at charges reduced to costs.

F. Proposed OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act

1. Background

Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare has paid cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act under the OPPS for covered outpatient hospital services. There are 11 cancer hospitals that meet the classification criteria in section 1886(d)(1)(B)(v) of the Act that are exempted from payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to hold harmless cancer hospitals and children's hospitals based on their pre-BBA amount under the OPPS. As required under section 1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference between payments for covered outpatient services under the OPPS and a “pre-BBA amount.” That is, cancer hospitals are permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPS) or hold harmless payments to ensure that they do not receive a payment that is lower under the OPPS than the payment they would have received before implementation of the OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA amount” is an amount equal to the product of the reasonable cost of the hospital for covered outpatient services for the portions of the hospital's cost reporting period (or periods) occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of the Act. The “pre-BBA amount,” including the determination of the base PCR, are defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital and Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10, as applicable) each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Act of 2010 amended section 1833(t) of the Act by adding a new paragraph (18), which instructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed the costs incurred by other hospitals furnishing services under section 1833(t) of the Act, as determined appropriate by the Secretary. In addition, section 1833(t)(18)(A) of the Act requires the Secretary to take into consideration the cost of drugs and biologicals incurred by such hospitals when studying cancer hospital costliness. Further, section 1833(t)(18)(B) of the Act provides that if the Secretary determines that costs by these cancer hospitals with respect to APC groups are determined to be greater than the costs of other hospitals furnishing services under section 1833(t) of the Act, the Secretary shall provide an appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher costs. After conducting the study required by section 1833(t)(18)(A) of the Act, we determined in 2011 that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incurred by other OPPS hospitals. For a complete discussion regarding the cancer hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74200 through 74201).

Based on our findings that costs incurred by cancer hospitals were greater than the costs incurred by other OPPS hospitals, we finalized a policy to provide a payment adjustment to the 11 specified cancer hospitals that reflects the higher outpatient costs as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a policy to provide additional payments to each of the 11 cancer hospitals so that each cancer hospital's final PCR for services provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the calendar year. The amount of the payment adjustment is made on an aggregate basis at cost report settlement. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs are assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period. For CYs 2012 and 2013, the target PCR for purposes of the cancer hospital payment adjustment was 0.91.

For CY 2014, we are proposing to continue our policy to provide additional payments to cancer hospitals so that each cancer hospital's final PCR is equal to the weighted average PCR (or “target PCR”) for the other OPPS hospitals using the most recent submitted or settled cost report data that are available at the time of the development of this proposed rule. To calculate the proposed CY 2014 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of this proposed rule, used to estimate costs for the CY 2014 OPPS. Using these cost report data, we included data from Worksheet E, Part B, for each hospital, using data from each hospital's most recent cost report, whether as submitted or settled. We then limited the dataset to the hospitals Start Printed Page 43583with CY 2012 claims data that we used to model the impact of the proposed CY 2014 APC relative weights (3,951 hospitals) because it is appropriate to use the same set of hospitals that we are using to calibrate the modeled CY 2014 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year ends ranging from 2011 to 2012. We then removed the cost report data of the 45 hospitals located in Puerto Rico from our dataset because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, therefore, their inclusion may bias the calculation of hospital-weighted statistics. We also removed the cost report data of 118 hospitals because the cost report data were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic file of 3,788 hospitals with cost report data.

Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishing services under the OPPS are approximately 90 percent of reasonable cost (a weighted average PCR of 0.90). Based on these data, we are proposing a target PCR of 0.90 to determine the CY 2014 cancer hospital payment adjustment to be paid at cost report settlement. Therefore, we are proposing that the payment amount associated with the cancer hospital payment adjustment to be determined at cost report settlement would be the additional payment needed to result in a proposed target PCR equal to 0.90 for each cancer hospital.

Table 10 below indicates the estimated percentage increase in OPPS payments to each cancer hospital for CY 2014 due to the cancer hospital payment adjustment policy. The actual amount of the CY 2014 cancer hospital payment adjustment for each cancer hospital will be determined at cost report settlement and will depend on each hospital's CY 2014 payments and costs. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.

G. Proposed Hospital Outpatient Outlier Payments

1. Background

Currently, the OPPS provides outlier payments on a service-by-service basis. In CY 2012, the outlier threshold was determined to be met when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,025 fixed-dollar threshold. We introduced a fixed-dollar threshold in CY 2005, in addition to the traditional multiple threshold, in order to better target outlier payments to those high-cost and complex procedures where a very costly service could present a hospital with significant financial loss. If the cost of a service meets both of these conditions, the multiple threshold and the fixed-dollar threshold, the outlier payment is calculated as 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment rate. Before CY 2009, this outlier payment had historically been considered a final payment by longstanding OPPS policy. However, we implemented a reconciliation process similar to the IPPS outlier reconciliation process for cost reports with cost reporting periods beginning on or after January 1, 2009, in our CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 through 68599).

It has been our policy for the past several years to report the actual amount of outlier payments as a percent of total spending in the claims being used to model the proposed OPPS. Our current estimate of total outlier payments as a percent of total CY 2012 OPPS payment, using available CY 2012 claims and the revised OPPS expenditure estimate for the 2013 Trustee's Report, is approximately 1.1 percent of the total aggregated OPPS payments. Therefore, for CY 2012, we estimate that we paid 0.1 percent above the CY 2012 outlier target of 1.0 percent of total aggregated OPPS payments.

As explained in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68295 through 68297), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2013. The outlier thresholds were set so that estimated CY 2013 aggregate outlier payments would equal 1.0 percent of the total estimated aggregate payments under the OPPS. Using CY 2012 claims data and CY 2013 payment rates, we currently estimate that the aggregate outlier payments for CY 2013 will be approximately 1.2 percent of the total CY 2013 OPPS payments. The difference between 1.2 percent and 1.0 percent is reflected in the regulatory impact analysis in section Start Printed Page 43584XXIII. of this proposed rule. We note that we provide estimated CY 2014 outlier payments for hospitals and CMHCs with claims included in the claims data that we used to model impacts in the Hospital-Specific Impacts—Provider-Specific Data file on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html.

2. Proposed Outlier Calculation

For CY 2014, we are proposing to continue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS for outlier payments. We are proposing that a portion of that 1.0 percent, an amount equal to 0.18 percent of outlier payments (or 0.0018 percent of total OPPS payments) would be allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier payments. As discussed in section VIII.D. of this proposed rule, for CMHCs, we are proposing to continue our longstanding policy that if a CMHC's cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to section VIII.D. of this proposed rule.

To ensure that the estimated CY 2014 aggregate outlier payments would equal 1.0 percent of estimated aggregate total payments under the OPPS, we are proposing that the hospital outlier threshold be set so that outlier payments would be triggered when the cost of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment amount and exceeds the APC payment rate plus a $2,775 fixed-dollar threshold.

We calculated the proposed fixed-dollar threshold using largely the standard methodology, most recently used for CY 2013 (77 FR 68295 through 68297). For purposes of estimating outlier payments for this proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2013 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCR, which are maintained by the Medicare contractors and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years.

In order to estimate the CY 2014 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2012 claims using the same inflation factor of 1.0993 that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767). We used an inflation factor of 1.0485 to estimate CY 2013 charges from the CY 2012 charges reported on CY 2012 claims. The methodology for determining this charge inflation factor is discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767). As we stated in the CY 2005 OPPS final rule with comment period (69 FR 65845), we believe that the use of these charge inflation factors are appropriate for the OPPS because, with the exception of the inpatient routine service cost centers, hospitals use the same ancillary and outpatient cost centers to capture costs and charges for inpatient and outpatient services.

As noted in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68011), we are concerned that we could systematically overestimate the OPPS hospital outlier threshold if we did not apply a CCR inflation adjustment factor. Therefore, for this CY 2014 OPPS/ASC proposed rule, we are proposing to apply the same CCR inflation adjustment factor that we are proposing to apply for the FY 2014 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2014 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2014, we are proposing to apply an adjustment factor of 0.9732 to the CCRs that were in the April 2013 OPSF to trend them forward from CY 2013 to CY 2014. The methodology for calculating this proposed adjustment was discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27766 through 27768).

Therefore, to model hospital outlier payments for this proposed rule, we applied the overall CCRs from the April 2013 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9732 to approximate CY 2014 CCRs) to charges on CY 2012 claims that were adjusted (using the proposed charge inflation factor of 1.0993 to approximate CY 2014 charges). We simulated aggregated CY 2014 hospital outlier payments using these costs for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming that outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, until the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2014 OPPS payments. We estimated that a proposed fixed-dollar threshold of $2,775, combined with the proposed multiple threshold of 1.75 times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS payments to outlier payments. We are proposing to continue to make an outlier payment that equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 times the APC payment amount when both the 1.75 multiple threshold and the proposed fixed-dollar threshold of $2,775 are met. For CMHCs, we are proposing that, if a CMHC's cost for partial hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate.

Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet the Hospital OQR Program requirements, we are proposing to continue the policy that we implemented in CY 2010 that the hospitals' costs will be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we refer readers to section XIII. of this proposed rule.

H. Proposed Calculation of an Adjusted Medicare Payment From the National Unadjusted Medicare Payment

The basic methodology for determining prospective payment rates for HOPD services under the OPPS is set forth in existing regulations at 42 CFR Part 419, Subparts C and D. For this CY Start Printed Page 435852014 OPPS/ASC proposed rule, the payment rate for most services and procedures for which payment is made under the OPPS is the product of the conversion factor calculated in accordance with section II.B. of this proposed rule and the relative payment weight determined under section II.A. of this proposed rule. Therefore, the proposed national unadjusted payment rate for most APCs contained in Addendum A to this proposed rule (which is available via the Internet on the CMS Web site and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) was calculated by multiplying the proposed CY 2014 scaled weight for the APC by the proposed CY 2014 conversion factor.

We note that section 1833(t)(17) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are required to report outpatient quality data and that fail to meet the Hospital OQR Program (formerly referred to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requirements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to section XIII. of this proposed rule.

We demonstrate in the steps below how to determine the APC payments that will be made in a calendar year under the OPPS to a hospital that fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “J1,” “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” or “V” (as defined in Addendum D1 to this proposed rule), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet the Hospital OQR Program requirements. We note that we are also proposing to create status indicator “J1” to reflect the proposed comprehensive APCs discussed in section II.A.2.e. of this proposed rule.

Individual providers interested in calculating the payment amount that they would receive for a specific service from the national unadjusted payment rates presented in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) should follow the formulas presented in the following steps. For purposes of the payment calculations below, we refer to the proposed national unadjusted payment rate for hospitals that meet the requirements of the Hospital OQR Program as the “full” national unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the proposed reporting ratio of 0.980 times the “full” national unadjusted payment rate. The national unadjusted payment rate used in the calculations below is either the full national unadjusted payment rate or the reduced national unadjusted payment rate, depending on whether the hospital met its Hospital OQR Program requirements in order to receive the full proposed CY 2014 OPPS fee schedule increase factor of 1.8 percent.

Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementation of the OPPS, we have used 60 percent to represent our estimate of that portion of costs attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553), we confirmed that this labor-related share for hospital outpatient services is appropriate.

The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific payment rate for a specific service.

X is the labor-related portion of the national unadjusted payment rate.

X = .60 * (national unadjusted payment rate)

Step 2. Determine the wage index area in which the hospital is located and identify the wage index level that applies to the specific hospital. The wage index values assigned to each area reflect the geographic statistical areas (which are based upon OMB standards) to which hospitals are assigned for FY 2014 under the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals designated as urban under section 601(g) of Public Law 98-21. (For further discussion of the proposed changes to the FY 2014 IPPS wage indices, as applied to the CY 2014 OPPS, we refer readers to section II.C. of this proposed rule.) We are proposing to continue to apply a wage index floor of 1.00 to frontier States, in accordance with section 10324 of the Affordable Care Act of 2010.

Step 3. Adjust the wage index of hospitals located in certain qualifying counties that have a relatively high percentage of hospital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Public Law 108-173. Addendum L to this proposed rule (which is available via the Internet on the CMS Web site) contains the qualifying counties and the associated proposed wage index increase developed for the FY 2014 IPPS and listed as Table 4J in the FY 2014 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​AcuteInpatientPPS/​index.html. This step is to be followed only if the hospital is not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the Act.

Step 4. Multiply the applicable wage index determined under Steps 2 and 3 by the amount determined under Step 1 that represents the labor-related portion of the national unadjusted payment rate.

The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the national unadjusted payment rate for the specific service by the wage index.

Xais the labor-related portion of the national unadjusted payment rate (wage adjusted).

Step 5. Calculate 40 percent (the nonlabor-related portion) of the national unadjusted payment rate and add that amount to the resulting product of Step 4. The result is the wage index adjusted Start Printed Page 43586payment rate for the relevant wage index area.

The formula below is a mathematical representation of Step 5 and calculates the remaining portion of the national payment rate, the amount not attributable to labor, and the adjusted payment for the specific service.

Y is the nonlabor-related portion of the national unadjusted payment rate.

Y = .40 * (national unadjusted payment rate)

Adjusted Medicare Payment = Y + Xa

Step 6. If a provider is an SCH, set forth in the regulations at § 412.92, or an EACH, which is considered to be an SCH under section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural area, as defined in § 412.64(b), or is treated as being located in a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment.

The formula below is a mathematical representation of Step 6 and applies the proposed rural adjustment for rural SCHs.

We have provided examples below of the calculation of both the proposed full and reduced national unadjusted payment rates that would apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we used a provider that is located in Brooklyn, New York that is assigned to CBSA 35644. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The proposed CY 2014 full national unadjusted payment rate for APC 0019 is approximately $345.75. The proposed reduced national unadjusted payment rate for APC 0019 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $338.84. This proposed reduced rate is calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019. The proposed FY 2014 wage index for a provider located in CBSA 35644 in New York is 1.3158. The proposed labor-related portion of the full national unadjusted payment is approximately $272.96 (.60 * $345.75 * 1.3158). The labor-related portion of the proposed reduced national unadjusted payment is approximately $267.51 (.60 * $338.84 * 1.3158). The proposed nonlabor-related portion of the full national unadjusted payment is approximately $138.30 (.40 * $345.75). The nonlabor-related portion of the proposed reduced national unadjusted payment is approximately $135.54 (.40 * $338.84). The sum of the labor-related and nonlabor-related portions of the proposed full national adjusted payment is approximately $411.26 ($272.96 + $138.30). The sum of the reduced national adjusted payment is approximately $403.05 ($267.51 + $135.54).

I. Proposed Beneficiary Copayments

1. Background

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national unadjusted copayment amount for a covered OPD service (or group of such services) furnished in a year in a manner so that the effective copayment rate (determined on a national unadjusted basis) for that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in calendar years thereafter, shall not exceed 40 percent of the APC payment rate.

Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or group of such services) furnished in a year, the national unadjusted copayment amount cannot be less than 20 percent of the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

Section 4104 of the Affordable Care Act eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certain requirements, including flexible sigmoidoscopies and screening colonoscopies, and waived the Part B deductible for screening colonoscopies that become diagnostic during the procedure. Our discussion of the changes made by the Affordable Care Act with regard to copayments for preventive services furnished on and after January 1, 2011, may be found in section XII.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 72013).

2. Proposed OPPS Copayment Policy

For CY 2014, we are proposing to determine copayment amounts for new and revised APCs using the same methodology that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we are proposing to use the same standard rounding principles that we have historically used in instances where the application of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standard rounding principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in which we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for services payable under the OPPS that would be effective January 1, 2014, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). As discussed in section XIII.G. of this proposed rule, for CY 2014, the proposed Medicare beneficiary's minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will equal the product of the reporting ratio and the national unadjusted copayment, or the product of the reporting ratio and the minimum unadjusted copayment, respectively, for the service.

We note that APC copayments may increase or decrease each year based on changes in the calculated APC payment rates due to updated cost report and claims data, and any changes to the OPPS cost modeling process. However, as described in the CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves beneficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459).

3. Proposed Calculation of an Adjusted Copayment Amount for an APC Group

Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a given service provided by a hospital that met or failed to meet its Hospital OQR Program requirements should follow the formulas presented in the following steps.

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the APC's national unadjusted copayment by its payment rate. For example, using APC 0019, approximately $69.15 is 20 percent of the proposed full national unadjusted payment rate of approximately $345.75. Start Printed Page 43587For APCs with only a minimum unadjusted copayment in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent.

The formula below is a mathematical representation of Step 1 and calculates the national copayment as a percentage of national payment for a given service.

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this proposed rule. Calculate the rural adjustment for eligible providers as indicated in Step 6 under section II.H. of this proposed rule.

Step 3. Multiply the percentage calculated in Step 1 by the payment rate calculated in Step 2. The result is the wage-adjusted copayment amount for the APC.

The formula below is a mathematical representation of Step 3 and applies the beneficiary payment percentage to the adjusted payment rate for a service calculated under section II.H. of this proposed rule, with and without the rural adjustment, to calculate the adjusted beneficiary copayment for a given service.

Step 4. For a hospital that failed to meet its Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the proposed reporting ratio of 0.980.

The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2014, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We note that the proposed national unadjusted payment rates and copayment rates shown in Addenda A and B to this proposed rule reflect the proposed full CY 2014 OPD fee schedule increase factor discussed in section II.B. of this proposed rule.

In addition, as noted above, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year.

Category III CPT codes, which describe new and emerging technologies, services, and procedures; and

Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services not described by CPT codes.

CPT codes are established by the American Medical Association (the AMA) and Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both through the annual rulemaking cycle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process through OPPS quarterly update CRs. This quarterly update process offers hospitals access to codes that may more accurately describe items or services furnished and/or provides payment or more accurate payment for these items or services in a timelier manner than if CMS waited for the annual rulemaking process. We solicit public comments on these new codes and finalize our proposals related to these codes through our annual rulemaking process. In Table 11 below, we summarize our proposed process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing their treatment under the hospital OPPS. We note that because the payment rates associated with codes effective July 1 are not available to us in time for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2013 OPPS quarterly update CR could not be included in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site), while those codes based upon the April 2013 OPPS quarterly update CR are included in Addendum B. Nevertheless, we are requesting public comments on the codes included in the July 2013 OPPS quarterly update CR and including these codes in the preamble of this proposed rule (we refer readers to Tables 13 and 14 for the July 2013 CPT and Level II HCPCS codes).

Table 11—Comment Timeframe for new or Revised HCPCS Codes

OPPS Quarterly update CR

Type of code

Effective date

Comments sought

When finalized

April l, 2013

Level II HCPCS Codes

April 1, 2013

CY 2014 OPPS/ASC proposed rule

CY 2014 OPPS/ASC final rule with comment period.

July 1, 2013

Level II HCPCS Codes

July 1, 2013

CY 2014 OPPS/ASC proposed rule

CY 2014 OPPS/ASC final rule with comment period.

Category I (certain vaccine codes) and III CPT codes

July 1, 2013

CY 2014 OPPS/ASC proposed rule

CY 2014 OPPS/ASC final rule with comment period.

October 1, 2013

Level II HCPCS Codes

October 1, 2013

CY 2014 OPPS/ASC final rule with comment period

CY 2015 OPPS/ASC final rule with comment period.

January 1, 2014

Level II HCPCS Codes

January 1, 2014

CY 2014 OPPS/ASC final rule with comment period

CY 2015 OPPS/ASC final rule with comment period.

Start Printed Page 43588

Category I and III CPT Codes

January 1, 2014

CY 2014 OPPS/ASC final rule with comment period

CY 2015 OPPS/ASC final rule with comment period.

This process is discussed in detail below. We have separated our discussion into two sections based on whether we are soliciting public comments in this CY 2014 OPPS/ASC proposed rule or whether we will be soliciting public comments in the CY 2014 OPPS/ASC final rule with comment period. We note that we sought public comments in the CY 2013 OPPS/ASC final rule with comment period on the new CPT and Level II HCPCS codes that were effective January 1, 2013. We also sought public comments in the CY 2013 OPPS/ASC final rule with comment period on the new Level II HCPCS codes that were effective October 1, 2012. These new codes, with an effective date of October 1, 2012, or January 1, 2013, were flagged with comment indicator “NI” (New code, interim APC assignment; comments will be accepted on the interim APC assignment for the new code) in Addendum B to the CY 2013 OPPS/ASC final rule with comment period to indicate that we were assigning them an interim payment status and an APC and payment rate, if applicable, which were subject to public comment following publication of the CY 2013 OPPS/ASC final rule with comment period. We will respond to public comments and finalize our interim OPPS treatment of these codes in the CY 2014 OPPS/ASC final rule with comment period.

1. Proposed Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective April 1, 2013 and July 1, 2013 for Which We Are Soliciting Public Comments in This CY 2014 OPPS/ASC Proposed Rule

Through the April 2013 OPPS quarterly update CR (Transmittal 2664, Change Request 8228, dated March 1, 2013), and the July 2013 OPPS quarterly update CR (Transmittal 2718, Change Request 8338, dated June 7, 2013), we recognized several new HCPCS codes for separate payment under the OPPS. Effective April 1 and July 1 of CY 2013, we made effective 18 new Level II HCPCS codes and 6 Category III CPT codes. Specifically, 8 new Level II HCPCS codes were effective for the April 2013 quarterly update and another 10 new Level II HCPCS codes were effective for the July 2013 quarterly update for a total of 18. In addition, six new Category III CPT codes were effective for the July 2013 quarterly update. Of the 24 new HCPCS codes, we recognized for separate payment under the OPPS 14 new codes from the April and July 2013 OPPS quarterly updates.

Through the April 2013 OPPS quarterly update CR, we allowed separate payment for five new Level II HCPCS codes. Specifically, as displayed in Table 12 below, we provided separate payment for HCPCS codes C9130, C9297, C9298, C9734, and C9735. HCPCS codes Q0507, Q0508, and Q0509 were assigned to OPPS status indicator “A” to indicate that they are paid through another Medicare payment system other than the OPPS. Although HCPCS codes Q0507, Q0508, and Q0509 were effective April 1, 2013, they were previously described by HCPCS code Q0505, which was deleted on March 31, 2013.

Table 12—New Level II HCPCS Codes Implemented in April 2013

CY 2013 HCPCS code

CY 2013 Long descriptor

Proposed CY 2014 status
indicator

Proposed CY 2014 APC

C9130*

Injection, immune globulin (Bivigam), 500 mg

G

9130

C9297*

Injection, omacetaxine mepesuccinate, 0.01 mg

G

9297

C9298*

Injection, ocriplasmin, 0.125 mg

G

9298

C9734 #

Focused ultrasound ablation/therapeutic intervention, other than uterine leiomyomata, with or without magnetic resonance (MR) guidance

S

0065

C9735

Anoscopy; with directed submucosal injection(s), any substance

T

0150

Q0507

Miscellaneous supply or accessory for use with an external ventricular assist device

A

N/A

Q0508

Miscellaneous supply or accessory for use with an implanted ventricular assist device

A

N/A

Q0509

Miscellaneous supply or accessory for use with any implanted ventricular assist device for which payment was not made under Medicare Part A

A

N/A

* The proposed payment rate for HCPCS codes C9130, C9297, and C9298 are based on ASP+6 percent.

# HCPCS code C9734 has been revised to delete the words “or without” from the long descriptor effective July 1, 2013.

In this CY 2014 OPPS/ASC proposed rule, we are soliciting public comments on the proposed status indicators and APC assignments, where applicable, for the Level II HCPCS codes listed in Table 12 of this proposed rule. The proposed payment rates for these codes, where applicable, can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site).

Through the July 2013 OPPS quarterly update CR, we allowed separate payment under the OPPS for 5 of the 10 new Level II HCPCS codes effective July 1, 2013. Specifically, as displayed in Table 13 below, we allowed separate payment for HCPCS codes C9131, C9736, G0460, Q2050, and Q2051. We note that two of the Level II HCPCS Q-codes that were made effective July 1, 2013, were previously described by HCPCS J-codes that were separately payable under the hospital OPPS. First, the HCPCS Workgroup replaced HCPCS code J9002 (Injection, doxorubicin hydrochloride, liposomal, Doxil, 10mg) with new HCPCS code Q2050, effective July 1, 2013, to appropriately identify and pay for both the brand and generic Start Printed Page 43589forms of doxorubicin hydrochloride liposome. Consequently, the status indicator for HCPCS code J9002 was changed to “E” (Not Payable by Medicare), effective July 1, 2013. Because HCPCS code Q2050 describes the same product as HCPCS code J9002, we continued its separate payment status and assigned HCPCS code Q2050 to status indicator “K” (Nonpass-through drugs and nonimplantable biological, including therapeutic radiopharmaceuticals; paid under OPPS; separate APC payment). We also continued to assign HCPCS code Q2050 to the same APC as HCPCS code J9002, specifically APC 7046 (Doxil injection), effective July 1, 2013.

Secondly, the HCPCS Workgroup replaced HCPCS codes J3487 (Injection, zoledronic acid (Zometa), 1 mg) and J3488 (Injection, zoledronic acid (Reclast), 1 mg) with one new HCPCS code, specifically Q2051, effective July 1, 2013, to appropriately identify and pay for both the brand and generic forms of zoledronic acid. Consequently, the status indicators for both HCPCS code J3487 and J3488 were changed to “E,” effective July 1, 2013, to indicate that these codes are not separately payable by Medicare. Because HCPCS code Q2051 describes the same product as HCPCS codes J3487 and J3488, we assigned HCPCS code Q2051 to separate payment status indicator “K,” effective July 1, 2013. Because HCPCS codes J3487 and J3488, which were assigned to two separate APCs, were replaced with only one code, we assigned HCPCS code Q2051 to a new APC to maintain data consistency for future rulemaking. Specifically, HCPCS code Q2051 is assigned to APC 1356 (Zoldedronic acid 1mg), effective July 1, 2013.

Of the 10 Level II HCPCS codes that were made effective July 1, 2013, we did not recognize for separate payment under the hospital OPPS five HCPCS codes. Specifically, HCPCS codes K0008, K0013, and K0900 are assigned to status indicator “Y” (Non-implantable durable medical equipment; not paid under OPPS); HCPCS code Q2033 is assigned to status indicator “L” (Not paid under OPPS; paid at reasonable cost); and HCPCS code Q0090 is assigned to status indicator “E” (Not payable/Non-covered by Medicare; not paid under OPPS).

Table 13 below includes a complete list of the Level II HCPCS codes that were made effective July 1, 2013. As stated above, the codes effective July 1, 2013, do not appear in Addendum B of this proposed rule, and, as a result, their proposed payment rates along with their proposed status indicators and proposed APC assignments, where applicable, for CY 2014 are provided in Table 13.

Table 13—New Level II HCPCS Codes Implemented in July 2013

CY 2013 HCPCS
code

CY 2013 Long descriptor

Proposed CY 2014 status
indicator

Proposed CY 2014 APC

Proposed CY 2014 payment rate

C9131*

Injection, ado-trastuzumab emtansine, 1 mg

G

9131

$29.40

C9736

Laparoscopy, surgical, radiofrequency ablation of uterine fibroid(s), including intraoperative guidance and monitoring, when performed

T

0131

3,765.67

G0460

Autologous platelet rich plasma for chronic wounds/ulcers, including phlebotomy, centrifugation, and all other preparatory procedures, administration and dressings, per treatment

For CY 2014, we are proposing to continue our established policy of recognizing Category I CPT vaccine codes for which FDA approval is imminent and Category III CPT codes that the AMA releases in January of each year for implementation in July through the OPPS quarterly update process. Under the OPPS, Category I CPT vaccine codes and Category III CPT codes that are released on the AMA Web site in January are made effective in July of the same year through the July OPPS quarterly update CR, consistent with the AMA's implementation date for the codes. For the July 2013 quarterly update, there were no new Category I CPT vaccine codes. However, we note that Level II HCPCS code Q2033, which is listed in Table 13, describes a flu vaccine that was effective July 1, 2013, and is separately payable by Medicare at reasonable cost.

Through the July 2013 OPPS quarterly update CR (Transmittal 2718, Change Request 8338, dated June 7, 2013), we allowed separate payment for four of the six new Category III CPT codes effective July 1, 2013. Specifically, as displayed in Table 14 below, we allowed separate payment for Category III CPT codes 0330T, 0331T, 0332T, and 0334T. We did not recognize for separate payment Category III CPT code 0329T because the device associated with this procedure has not received FDA approval. In addition, we did not recognize for separate payment Category III CPT code 0333T because this procedure is not covered by Medicare. As listed in Table 14, both CPT codes 0329T and 0333T are assigned to status indicator “E” (Not payable/Non-covered by Medicare; not paid under OPPS).

Table 14 below lists the Category III CPT codes that were implemented in July 2013, along with their proposed status indicators, proposed APC assignments, and proposed payment rates, where applicable, for CY 2014.Start Printed Page 43590

Table 14—New Category III CPT Codes Implemented in July 2013

CY 2013 CPT code

CY 2013 Long descriptor

Proposed CY 2014
status
indicator

Proposed CY 2014 APC

Proposed CY 2014 payment rate

0329T

Monitoring of intraocular pressure for 24 hours or longer, unilateral or bilateral, with interpretation and report

E

N/A

N/A

0330T

Tear film imaging, unilateral or bilateral, with interpretation and report

Sacroiliac joint stabilization for arthrodesis, percutaneous or minimally invasive (indirect visualization), includes obtaining and applying autograft or allograft (structural or morselized), when performed, includes image guidance when performed (eg, CT or fluoroscopic)

T

0208

4,171.56

We are soliciting public comments on the CY 2014 proposed status indicators and the proposed APC assignments and payment rates for the Level II HCPCS codes and the Category III CPT codes that were effective April 1, 2013, and July 1, 2013. These codes are listed in Tables 12, 13, and 14 of this proposed rule. We are proposing to finalize their status indicators and their APC assignments and payment rates, if applicable, in the CY 2014 OPPS/ASC final rule with comment period. Because the new Category III CPT and Level II HCPCS codes that become effective for July are not available to us in time for incorporation into the Addenda to the OPPS/ASC proposed rule, our policy is to include the codes, their proposed status indicators, proposed APCs (where applicable), and proposed payment rates (where applicable) in the preamble of the proposed rule but not in the Addenda to the proposed rule. These codes are listed in Tables 13 and 14, respectively, of this proposed rule. We are proposing to incorporate these codes into Addendum B to the CY 2014 OPPS/ASC final rule with comment period, which is consistent with our annual OPPS update policy. The Level II HCPCS codes implemented or modified through the April 2013 OPPS quarterly update CR and displayed in Table 12 are included in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site), where their proposed CY 2014 payment rates are also shown.

2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2014 for Which We Will Be Soliciting Public Comments in the CY 2014 OPPS/ASC Final Rule With Comment Period

As has been our practice in the past, we incorporate those new Category I and III CPT codes and new Level II HCPCS codes that are effective January 1 in the final rule with comment period updating the OPPS for the following calendar year. These codes are released to the public through the CMS HCPCS Workgroup (for Level II HCPCS codes) and the AMA's Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October OPPS quarterly update CRs and incorporated these new codes in the final rule with comment period updating the OPPS for the following calendar year. For CY 2014, these codes will be flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period to indicate that we are assigning them an interim payment status which is subject to public comment. In addition, the CPT and Level II HCPCS codes that will be effective January 1, 2014, will be flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period. Specifically, the interim status indicator and the APC assignment and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are open to public comment in the final rule with comment period, and we respond to these comments in the OPPS/ASC final rule with comment period for the next calendar year's OPPS/ASC update. We are proposing to continue this process for CY 2014. Specifically, for CY 2014, we are proposing to include in Addendum B to the CY 2014 OPPS/ASC final rule with comment period the following new HCPCS codes:

New Level II HCPCS codes effective October 1, 2013 that would be incorporated in the October 2013 OPPS quarterly update CR;

New Category I and III CPT codes effective January 1, 2014 that would be incorporated in the January 2014 OPPS quarterly update CR; and

New Level II HCPCS codes effective January 1, 2014 that would be incorporated in the January 2014 OPPS quarterly update CR.

As stated above, the October 1, 2013 and January 1, 2014 codes would be flagged with comment indicator “NI” in Addendum B to the CY 2014 OPPS/ASC final rule with comment period to indicate that we have assigned them an interim OPPS payment status for CY 2014. We are proposing that their status indicators and their APC assignments and payment rates, if applicable, would be open to public comment and would be finalized in the CY 2015 OPPS/ASC final rule with comment period.

B. Proposed OPPS Changes—Variations Within APCs

1. Background

Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient department services. Section 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification system, referred to as Ambulatory Payment Classifications (APCs), as set forth in Start Printed Page 43591§ 419.31 of the regulations. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is homogeneous both clinically and in terms of resource use. Using this classification system, we have established distinct groups of similar services. We also have developed separate APC groups for certain medical devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices.

We have packaged into payment for each procedure or service within an APC group the costs associated with those items or services that are directly related to, and supportive of, performing the main independent procedures or furnishing the services. Therefore, we do not make separate payment for these packaged items or services. In general, according to the regulations at § 419.2(b), packaged items and services include, but are not limited to:

(1) Use of an operating suite, procedure room, or treatment room;

(2) Use of recovery room;

(3) Use of an observation bed;

(4) Anesthesia, certain drugs, biologicals, and other pharmaceuticals; medical and surgical supplies and equipment; surgical dressings; and devices used for external reduction of fractures and dislocations;

(5) Supplies and equipment for administering and monitoring anesthesia or sedation;

(11) Implantable prosthetic devices (other than dental) which replace all or part of an internal body organ (including colostomy bags and supplies directly related to colostomy care), including replacement of these devices;

Significant revisions to the regulations at § 419.2(b) are being proposed. Further discussion of our packaging proposals is included in section II.A.3. of this proposed rule.

In CY 2008, we implemented composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service (72 FR 66650 through 66652). Under the CY 2013 OPPS (77 FR 68243 through 68258), we provided composite APC payments for 10 categories of services:

(1) Mental Health Services (APC 0034);

(2) Cardiac Electrophysiologic Evaluation and Ablation (APC 8000);

(3) Low Dose Rate (LDR) Prostate Brachytherapy (APC 8001);

(4) Level I Extended Assessment & Management Composite (APC 8002);

(5) Level II Extended Assessment & Management Composite (APC 8003);

(6) Ultrasound (APC 8004);

(7) CT and CTA without Contrast (APC 8005);

(8) CT and CTA with Contrast (APC 8006);

(9) MRI and MRA without Contrast Composite (APC 8007); and

(10) MRI and MRA with Contrast Composite (APC 8008)

Further discussion of composite APCs is included in section II.A.2.f. of this proposed rule.

Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC relative payment weight represents the hospital cost of the services included in that APC, relative to the hospital cost of the services included in new proposed APC 0634 (Hospital Clinic Visits). The APC relative payment weights are scaled to new proposed APC 0634 because it is the hospital clinic visit APC and because clinic visits are among the most frequently furnished services in the hospital outpatient setting. We refer readers to section VII. (Proposed OPPS Payment for Hospital Outpatient Visits) of this proposed rule for further discussion of the establishment of new proposed APC 0634.

Section 1833(t)(9)(A) of the Act requires the Secretary to review, on a recurring basis occurring no less than annually, and revise the groups, the relative payment weights, and the wage and other adjustments to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors. Section 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representatives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups and the relative payment weights (the HOP Panel recommendations for specific services for the CY 2014 OPPS and our responses to them are discussed in the relevant specific sections throughout this proposed rule).

Finally, section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group cannot be considered comparable with respect to the use of resources if the highest cost for an item or service in the group is more than 2 times greater than the lowest cost for an item or service within the same group (referred to as the “2 times rule”). The statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (but the Secretary may not make such an exception in the case of a drug or biological that has been designated as an orphan drug under section 526 of the Federal Food, Drug, and Cosmetic Act).

2. Application of the 2 Times Rule

In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resources, if the cost of the highest cost item or service within an APC group is more than 2 times greater than the cost of the lowest cost item or service within that same group. In making this determination, we consider only those HCPCS codes that are significant based on the number of claims. We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consider codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant (75 FR 71832). This longstanding definition of when a HCPCS code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the APC cost. In this proposed rule, we are proposing to make exceptions to this limit on the variation of costs within each APC group in unusual cases, such as low-volume items and services, for CY 2014.

We have identified APCs with 2 times rule violations for which we are proposing changes to their HCPCS Start Printed Page 43592codes' APC assignments in Addendum B to this proposed rule. We note that Addendum B does not appear in the printed version of the Federal Register as part of the CY 2014 OPPS/ASC proposed rule. Rather, it is published and made available via the Internet on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html. In these cases, to eliminate a 2 times rule violation or to improve clinical and resource homogeneity, we are proposing to reassign the codes to APCs that contain services that are similar with regard to both their clinical and resource characteristics. In many cases, the proposed HCPCS code reassignments and associated APC reconfigurations for CY 2014 included in this proposed rule are related to changes in costs of services that were observed in the CY 2012 claims data newly available for CY 2014 ratesetting. We also are proposing changes to the status indicators for some codes that are not specifically and separately discussed in this proposed rule. In these cases, we are proposing to change the status indicators for some codes because we believe that another status indicator would more accurately describe their payment status from an OPPS perspective based on the policies that we are proposing for CY 2014. In addition, we are proposing to rename existing APCs or create new clinical APCs to complement proposed HCPCS code reassignments. Addendum B of this CY 2014 OPPS/ASC proposed rule identifies with a comment indicator “CH” those HCPCS codes for which we are proposing a change to the APC assignment or status indicator, or both, that were initially assigned in the April 2013 Addendum B Update (available via the Internet on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html).

3. Proposed Exceptions to the 2 Times Rule

As discussed earlier, we may make exceptions to the 2 times limit on the variation of costs within each APC group in unusual cases such as low-volume items and services. Taking into account the APC changes that we are proposing for CY 2014, we reviewed all the APCs to determine which APCs would not satisfy the 2 times rule. Then we used the following criteria to decide whether to propose exceptions to the 2 times rule for affected APCs:

Resource homogeneity;

Clinical homogeneity;

Hospital outpatient setting utilization;

Frequency of service (volume); and

Opportunity for upcoding and code fragments.

For a detailed discussion of these criteria, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 18458).

We note that, for cases in which a recommendation by the HOP Panel appears to result in or allow a violation of the 2 times rule, we generally accept the Panel's recommendation because those recommendations are based on explicit consideration of resource use, clinical homogeneity, site of service, and the quality of the claims data used to determine the APC payment rates.

Table 15 of this proposed rule lists 10 APCs that we are proposing to exempt from the 2 times rule for CY 2014 based on the criteria cited above and based on claims data processed from January 1, 2012, through December 31, 2012. For the final rule with comment period, we plan to use claims data for dates of service between January 1, 2012, and December 31, 2012, that were processed on or before June 30, 2013, and updated CCRs, if available. Based on the CY 2012 claims data, we found 10 APCs with 2 times rule violations. We applied the criteria as described earlier to identify the APCs that we are proposing as exceptions to the 2 times rule for CY 2014, and identified 10 APCs that meet the criteria for exception to the 2 times rule for this proposed rule. We have not included in this count those APCs where a 2 times rule violation is not a relevant concept, such as APC 0375 (Ancillary Outpatient Services when Patient Expires), with an APC cost set based on multiple procedure claims. Therefore, we have identified only APCs, including those with criteria-based costs, those APCs listed under section II.A.2.f. of this proposed rule, with 2 times rule violations. These proposed APC exceptions are listed in Table 15 below.

C. Proposed OPPS APC-Specific Policies

HCPCS code C9726 (Placement and removal (if performed) of applicator into breast for radiation therapy) was created effective January 1, 2006 to describe the service of placing and removing (if performed) an applicator into the breast for radiation therapy. The service was brought to our attention by means of a New Technology APC application, and we created HCPCS code C9726 because there were no HCPCS codes that described this service. HCPCS code C9726 is assigned to APC 0028, which has a CY 2013 payment rate of $1,862.77. Based on our CY 2014 proposed rule claims data, APC 0028 has a geometric mean cost of approximately $2,147, and HCPCS code C9726 has a geometric mean cost of Start Printed Page 43593approximately $2,165 based upon 8 single claims.

The AMA's CPT Editorial Panel created two new Category I CPT codes for intraoperative radiation therapy (IORT) treatment delivery, effective January 1, 2012: CPT codes 77424 (Intraoperative radiation treatment delivery, x-ray, single treatment session) and 77425 (Intraoperative radiation treatment delivery, electrons, single treatment session). For CY 2013, we finalized a policy to assign these CPT codes to APC 0065 (IORT, MRgFUS, and MEG), with a CY 2013 payment rate of $978.25 because we believed these IORT service codes were similar to services assigned to APC 0065 in terms of clinical characteristics, and the range of estimated costs for IORT services (77 FR 68345).

CPT codes 77424 and 77425 describe the placement and removal (if performed) of an applicator into the breast for radiation therapy, as well as the delivery of radiation therapy when performed intraoperatively, and HCPCS code C9726 is no longer required to report the placement and removal of the applicator. Therefore, we are proposing to delete HCPCS code C9726, effective January 1, 2014. Under this proposal, hospitals would report the costs of the service to place and remove (if performed) an applicator into the breast for radiation therapy, as well as the delivery of radiation therapy when performed intraoperatively, with CPT codes 77424 and 77425, which we are proposing to maintain assignment to APC 0065. We are inviting public comments on this proposal.

2. Proton Beam Radiation Therapy (APCs 0664 and 0667)

APC 0664 (Level I Proton Beam Radiation Therapy) includes two procedures, CPT code 77520 (Proton treatment delivery; simple, without compensation) with an estimated cost of approximately $417 (based on 217 single claims of 218 total claims submitted for CY 2012), and CPT code 77522 (Proton treatment delivery; simple, with compensation) with an estimated cost of approximately $883 (based on 10,629 single claims of 11,260 total claims submitted for CY 2012). APC 0667 (Level II Proton Beam Radiation Therapy) also includes two procedures: CPT code 77523 (Proton treatment delivery, intermediate), with an estimated cost of approximately $687 (based on 6,707 single claims of 7,104 total claims submitted for CY 2012); and CPT code 77525 (Proton treatment delivery, complex), with an estimated cost of approximately $1,044 (based on 438 single claims of 547 total claims submitted for CY 2012). Based on these CY 2012 claims data, the estimated cost of APC 0664 is approximately $870, and the estimated cost of APC 0667 is approximately $705.

The payment rates for proton beam radiation therapy services are set annually based on claims data according to the standard OPPS ratesetting methodology. Based on our updated data for CY 2014, we noted a violation of the 2 times rule in APC 0664. As we discuss in section III.B. of this proposed rule, a 2 times violation occurs when the cost of the highest cost item or service within an APC group is more than 2 times greater than the cost of the lowest cost item or service within that same group. In making this determination, we consider only codes that have more than 1,000 single major claims or codes that have both greater than 99 single major claims and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant. If neither of these claims thresholds are met, there is not a 2 times violation even if the highest cost item or service is more than 2 times greater than the cost of the lowest cost item or service in the APC. In prior years, even though the cost of CPT code 77522 was more than 2 times the cost of CPT code 77520, there was no 2 times violation in APC 0664 because the claims volume for CPT code 77520 did not meet either of the claims volume tests discussed above (72 FR 66719; 75 FR 71901; and 77 FR 68341). However, for CY 2014, the claims volume for CPT code 77520 increased such that there is a 2 times violation within APC 0664, with the single claims for CPT code 77520 greater than 99 and contributing 2 percent of the single claims used to establish the cost of APC 0664.

To resolve the 2 times violation, we are proposing to reassign CPT codes 77520 and 77522 from APC 0664 to APC 0667, and to revise the title of APC 0667 to “Proton Beam Radiation Therapy,” which would now include all proton beam radiation therapy services. We also are proposing to delete APC 0664. The estimated cost of the new APC 0667 is approximately $998, which would be the payment rate for each of the four proton beam radiation therapy services. We are inviting public comments on this proposal.

3. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067)

Since 2001, we have distinguished the various methods of delivery of stereotactic radiosurgery (SRS) with HCPCS G-codes. SRS includes two different source types, specifically, Cobalt-60 and linear accelerator (linac). Among the linac-based SRS devices, the HCPCS G-codes distinguish between robotic and nonrobotic (66 FR 59865). In 2007 new CPT codes were established for SRS, and at that time, we recognized one of the three new CPT codes for SRS for separate payment under the OPPS, but we did not replace all of the HCPCS G-codes for SRS with the new CPT codes because we believed that the distinctions reflected in the HCPCS G-codes should be maintained for APC assignment purposes. Specifically, in 2007 we replaced HCPCS code G0243 (Multi-source photon stereotactic radiosurgery, delivery including collimator changes and custom plugging, complete course of treatment, all lesions) with CPT code 77371 because this CPT code corresponded directly to procedures for HCPCS code G0243. We refer readers to the CY 2007 OPPS final rule (71 FR 68023 through 68026) for a detailed discussion of the history of the SRS codes.

Since 2007, HCPCS G-codes G0173, G0251, G0339, G0340, and CPT code 77371 have been the codes used in the OPPS to describe SRS treatment delivery procedures. However, SRS techniques and equipment have evolved and advanced over time. In light of these considerations, we have reexamined the HCPCS G-codes and CPT codes for SRS with the intent of identifying the codes that would best capture the significant differences between the various procedures while eliminating unnecessary complexity, redundancy, and outdated distinctions that no longer represent meaningful distinctions, given current technology and clinical practice. Based on our review of the current SRS technology, it is our understanding that most current linac-based SRS technology incorporates some type of robotic feature. Therefore, we believe that it is no longer necessary to continue to distinguish robotic versus nonrobotic linac-based SRS through the HCPCS G-codes. For CY 2014, we are proposing to replace the existing four SRS HCPCS G-codes G0173, G0251, G0339, and G0340, with the SRS CPT codes 77372 and 77373. We believe that utilizing all of the CPT codes for SRS (77371, 77372, and 77373) will more accurately capture the most significant distinctions between the various SRS procedures that are currently used today, namely: (1) Cobalt-60 versus linac; and (2) single session cranial treatment versus fractionated treatments.

Table 16 below shows the complete list of HCPCS G-codes and CPT codes for SRS, along with their long descriptors. The table also shows the proposed CPT codes and their Start Printed Page 43594associated status indicators and APC assignments for the current HCPCS G-codes for SRS that we are proposing to replace. We are proposing to assign CPT code 77373 as the only code assigned to APC 0066, which we are proposing to rename “Level I Stereotactic Radiosurgery.” We are proposing to assign both of the single session cranial treatment codes (CPT codes 77371 and 77372) as the only two codes assigned to APC 0067, which we are proposing to rename “Level II Stereotactic Radiosurgery.” We believe that the high degree of clinical similarity of CPT codes 77371 and 77372 supports the proposed grouping of these procedures together in the proposed renamed APC 0067 (Level II Stereotactic Radiosurgery). The CY 2014 APC proposed payment rates for the CPT codes for SRS can be found in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site). We are proposing to finalize their status indicators and their APC assignments and payment rates in the CY 2014 OPPS/ASC final rule with comment period.

In addition, although the SRS HCPCS G-codes will no longer be separately payable under the OPPS, the codes will remain active in the MPFS for CY 2014. Consequently, we are proposing to reassign the HCPCS G-codes for SRS to OPPS status indicator “B” (Alternative code may be available under the OPPS) for CY 2014.

Linear accelerator based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, maximum five sessions per course of treatment

77373

Stereotactic body radiation therapy, treatment delivery, per fraction to 1 or more lesions, including image guidance, entire course not to exceed 5 fractions

S

0066

G0339 *

Image-guided robotic linear accelerator-based stereotactic radiosurgery, complete course of therapy in one session or first session of fractionated treatment.

G0340

Image-guided robotic linear accelerator-based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, second through fifth sessions, maximum five sessions per course of treatment.

*Although not reflected in the above table (in order to avoid confusion), single session cranial cases currently billed with HCPCS code G0339 would be billed with CPT code 77372 beginning in CY 2014. Any other reporting of HCPCS code G0339 (other than single session cranial cases) would be reported beginning in CY 2014 with CPT code 77373.

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

a. Background

Section 1833(t)(6)(B)(iii) of the Act requires that, under the OPPS, a category of devices be eligible for transitional pass-through payments for at least 2, but not more than 3 years. This pass-through payment eligibility period begins with the first date on which transitional pass-through payments may be made for any medical device that is described by the category. We may establish a new device category for pass-through payment in any quarter. Under our established policy, we base the pass-through status expiration date for a device category on the date on which pass-through payment is effective for the category, which is the first date on which pass-through payment may be made for any medical device that is described by such category. We propose and finalize the dates for expiration of pass-through status for device categories as part of the OPPS annual update.

We also have an established policy to package the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now separately paid in accordance with section 1833(t)(2)(H) of the Act, are an exception to this established policy.

There currently are three device categories eligible for pass-through payment. These device categories are described by HCPCS codes C1830 (Powered bone marrow biopsy needle) and C1840 (Lens, intraocular (telescopic)), which we made effective for pass-through payment as of October 1, 2011; and HCPCS code C1886 (Catheter, extravascular tissue ablation, any modality (insertable)), which we made effective for pass-through payment as of January 1, 2012. Recognizing that these three device categories were eligible for at least 2, but not more than 3, years of pass-through status, in the CY 2013 OPPS/ASC final rule with comment period, we finalized the expiration of pass-through payment for all three of these HCPCS codes, which will expire after December 31, 2013 (77 FR 68352). Therefore, in accordance with our established policy, after December 31, 2013, we will Start Printed Page 43595package the respective costs of the HCPCS codes C1830, C1840, and C1886 devices into the costs of the procedures with which the devices are reported in the hospital claims data used in OPPS ratesetting.

b. Proposed CY 2014 Policy

As previously stated, we have an established policy to package the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the claims data used to set the payment rates (67 FR 66763). In the case of device category C1840, we are proposing that the device costs be packaged only when billed with CPT code 0308T (Insertion of ocular telescope prosthesis including removal of crystalline lens), which became effective on July 1, 2012. We announced the policy that device category C1840 must be billed with CPT code 0308T, effective July 1, 2012, in Transmittal 2483, dated June 8, 2012. CPT code 0308T is currently assigned to APC 0234 (Level IV Anterior Segment Eye Procedures), which has a proposed geometric mean cost of approximately $1,794. When the CPT code C1840 device costs are packaged into the cost of CPT code 0308T (and the equivalent procedure described by HCPCS code C9732 for the first half of 2012), the proposed mean cost of the procedure is approximately $15,249. Based on this mean cost for CPT code 0308T, we are proposing to create new APC 0351 (Level VII Anterior Segment Eye Procedures), and to assign CPT code 0308T to this APC, which has a proposed mean cost of approximately $15,249. The mean cost for CY 2014 that will be reported in the final rule for this new APC will depend on the mean cost of CPT code 0308T (including the cost of HCPCS code C1840) as calculated using claims data available for the final rule.

With the expiration of these three device categories at the end of CY 2013, there are no currently active categories for which we would propose expiration of pass-through status in CY 2014. If we create new device categories for pass-through payment status during the remainder of CY 2013 or during CY 2014, we will propose future expiration dates in accordance with the statutory requirement that they be eligible for pass-through payments for at least 2, but not more than 3, years from the date on which pass-through payment for any medical device described by the category may first be made.

a. Background

Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional pass-through payment for an eligible device as the amount by which the hospital's charges for a device, adjusted to cost (the cost of the device) exceeds the portion of the otherwise applicable Medicare outpatient department fee schedule amount (the APC payment amount) associated with the device. We have an established policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of the associated devices that are eligible for pass-through payments (66 FR 59904) for purposes of estimating the portion of the otherwise applicable APC payment amount associated with pass-through devices. For eligible device categories, we deduct an amount that reflects the portion of the APC payment amount that we determine is associated with the cost of the device, defined as the device APC offset amount, from the charges adjusted to cost for the device, as provided by section 1833(t)(6)(D)(ii) of the Act, to determine the eligible device's pass-through payment amount. We have consistently used an established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC rates (72 FR 66751 through 66752). We establish and update the applicable device APC offset amounts for eligible pass-through device categories through the transmittals that implement the quarterly OPPS updates.

Currently, we have published a list of all procedural APCs with the CY 2013 portions (both percentages and dollar amounts) of the APC payment amounts that we determine are associated with the cost of devices on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html. The dollar amounts are used as the device APC offset amounts. In addition, in accordance with our established practice, the device APC offset amounts in a related APC are used in order to evaluate whether the cost of a device in an application for a new device category for pass-through payment is not insignificant in relation to the APC payment amount for the service related to the category of devices, as specified in our regulations at § 419.66(d).

Beginning in CY 2010, we include packaged costs related to implantable biologicals in the device offset calculations in accordance with our policy that the pass-through evaluation process and payment methodology for implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and that are newly approved for pass-through status beginning on or after January 1, 2010, be the device pass-through process and payment methodology only (74 FR 60476).

b. Proposed CY 2014 Policy

We are proposing to continue, for CY 2014, our established methodology to estimate the portion of each APC payment rate that could reasonably be attributed to (that is, reflect) the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC payment rates. We are proposing to continue our policy, for CY 2014, that the pass-through evaluation process and pass-through payment methodology for implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and that are newly approved for pass-through status beginning on or after January 1, 2010, be the device pass-through process and payment methodology only. The rationale for this policy is provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 through 60477). We also are proposing to continue our established policies for calculating and setting the device APC offset amounts for each device category eligible for pass-through payment. In addition, we are proposing to continue to review each new device category on a case-by-case basis to determine whether device costs associated with the new category are already packaged into the existing APC structure. If device costs packaged into the existing APC structure are associated with the new category, we are proposing to deduct the device APC offset amount from the pass-through payment for the device category. As stated earlier, these device APC offset amounts also would be used in order to evaluate whether the cost of a device in an application for a new device category for pass-through payment is not insignificant in relation to the APC payment amount for the service related to the category of devices (§ 419.66(d)).

For CY 2014, we also are proposing to continue our policy established in CY 2010 to include implantable biologicals in our calculation of the device APC offset amounts. In addition, we are Start Printed Page 43596proposing to continue to calculate and set any device APC offset amount for any new device pass-through category that includes a newly eligible implantable biological beginning in CY 2014 using the same methodology we have historically used to calculate and set device APC offset amounts for device categories eligible for pass-through payment, and to include the costs of implantable biologicals in the calculation of the device APC offset amounts.

In addition, we are proposing to update the list of all procedural APCs with the final CY 2014 portions of the APC payment amounts that we determine are associated with the cost of devices on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html so that this information is available for use by the public in developing potential CY 2014 device pass-through payment applications and by CMS in reviewing those applications.

We established a number of specific criteria that new medical devices must meet to be considered eligible for pass-through payments under section 1833(t)(6) of the Act (42 CFR 419.66; 65 FR 18480 and 65 FR 47672 through 47674). In this proposed rule, we are proposing to change one of these criteria for device pass-through payment, described at § 419.66(b)(3), which requires that a device “is an integral and subordinate part of the service furnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted whether or not it remains with the patient when the patient is released from the hospital” (65 FR 47674).

Regarding the existing regulation at § 419.66(b)(3), applicants for device pass-through status have continued to ask what is meant by the phrase “integral and subordinate part of the service furnished,” and more specifically, what the terms “integral” and “subordinate” mean. These terms have not been specifically defined or described in prior regulatory language, preamble, or guidance. In an effort to reduce further confusion and ensure all applicants understand the intent of the existing regulation, we are proposing to provide guidance on the meaning of the term “integral” and delete the term “subordinate” from the existing regulation in this proposed rule. We have interpreted the term “integral” to mean that the device is necessary to furnish or deliver the primary procedure with which it is used. For example, a pacemaker is integral to the procedure of implantation of a pacemaker. We have interpreted the accompanying term “subordinate” in conjunction with the term “integral,” in that a “subordinate” device is dependent upon the overall procedure of implanting the device, and we have not interpreted the term separately, or applied the term “subordinate” as a separate criterion. Because of confusion among pass-through status applicants regarding the use of both terms “integral” and “subordinate,” and because we do not believe it is necessary that the regulation specifically state that a device must be subordinate to the procedure, in addition to the requirement that a device be integral to the procedure, and have not treated “subordinate” as a separate criterion, as previously explained, we are proposing to delete the term “subordinate” from this criterion's regulatory text under existing § 419.66(b)(3). The proposed revised § 419.66(b)(3) regulatory language reads: “The device is an integral part of the service furnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted, whether or not it remains with the patient when the patient is released from the hospital.”

1. Background

To ensure equitable payment when the hospital receives a device without cost or with full credit, in CY 2007, we implemented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals are instructed to report no cost/full credit cases using the “FB” modifier on the line with the procedure code in which the no cost/full credit device is used. In cases in which the device is furnished without cost or with full credit, the hospital is instructed to report a token device charge of less than $1.01. In cases in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospital is instructed to report as the device charge the difference between its usual charge for the device being implanted and its usual charge for the device for which it received full credit. In CY 2008, we expanded this payment adjustment policy to include cases in which hospitals receive partial credit of 50 percent or more of the cost of a specified device. Hospitals are instructed to append the “FC” modifier to the procedure code that reports the service provided to furnish the device when they receive a partial credit of 50 percent or more of the cost of the new device. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for more background information on the “FB” and “FC” payment adjustment policies (72 FR 66743 through 66749).

2. Proposed Policy for CY 2014

Beginning in CY 2014, we are proposing to modify our existing policy of reducing OPPS payment for specified APCs when a hospital furnishes a specified device without cost or with a full or partial credit. For CY 2013 and prior years, our policy has been to reduce OPPS payment by 100 percent of the device offset amount when a hospital furnishes a specified device without cost or with a full credit and by 50 percent of the device offset amount when the hospital receives partial credit in the amount of 50 percent or more of the cost for the specified device. For CY 2014, we are proposing to reduce OPPS payment, for the applicable APCs listed below in Table 17, by the full or partial credit a provider receives for a replaced device. Specifically, under this proposed policy for CY 2014, hospitals would be required to report the amount of the credit in the amount portion for value code “FD” (Credit Received from the Manufacturer for a Replaced Medical Device) when the hospital receives a credit for a replaced device listed in Table 18 that is 50 percent or greater than the cost of the device. Under this proposal, hospitals would no longer be required to append the “FB” or “FC” modifier when receiving a device at no cost or with a full or partial credit.

For CY 2014, we are proposing to continue using the three criteria established in the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to which our modified CY 2014 policy applies (71 FR 68072 through 68077). Specifically: (1) All procedures assigned to the selected APCs must involve implantable devices that would be reported if device insertion procedures were performed; (2) the required devices must be surgically inserted or implanted devices that remain in the patient's body after the conclusion of the procedure (at least Start Printed Page 43597temporarily); and (3) the device offset amount must be significant, which, for purposes of this policy, is defined as exceeding 40 percent of the APC cost. We also are proposing to continue to restrict the devices to which the APC payment adjustment would apply to a specific set of costly devices to ensure that the adjustment would not be triggered by the implantation of an inexpensive device whose cost would not constitute a significant proportion of the total payment rate for an APC. We continue to believe these criteria are appropriate because no cost devices and device credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the beneficiary leaves the hospital. We believe that the reduction in payment is appropriate only when the cost of the device is a significant part of the total cost of the APC into which the device cost is packaged, and that the 40-percent threshold is a reasonable definition of a significant cost.

We examined the offset amounts calculated from the CY 2014 proposed rule data and the clinical characteristics of the proposed CY 2014 APCs to determine which APCs would meet the criteria for CY 2014. Based on the CY 2012 claims data available for this proposed rule, we are not proposing any changes to the APCs and devices to which this proposed modified policy would apply.

Table 17 below lists the proposed APCs to which the proposed modified payment adjustment policy for no cost/full credit and partial credit devices would apply in CY 2014.

Table 18 below lists the proposed devices to which the proposed modified payment adjustment policy for no cost/full credit and partial credit devices would apply in CY 2014. We are proposing to update the lists of APCs and devices to which the proposed modified no cost/full credit and partial credit device adjustment policy would apply for CY 2014, consistent with the three criteria discussed earlier in this section, based on the final CY 2012 claims data available for the CY 2014 OPPS/ASC final rule with comment period.

Table 17—Proposed APCs to Which the Proposed Modified No Cost/Full Credit and Partial Credit Device Payment Adjustment Policy Would Apply in CY 2014

Proposed CY 2014 APC

Proposed CY 2014 APC title

0039

Level I Implantation of Neurostimulator Generator.

0040

Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.

1. Background

Section 1833(t)(6) of the Act provides for temporary additional payments or “transitional pass-through payments” for certain drugs and biologicals (also referred to as biologics). As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), this provision requires the Secretary to make additional payments to hospitals for: current orphan drugs, as designated under section 526 of the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current drugs and biologicals and brachytherapy sources used in cancer therapy; and current radiopharmaceutical drugs and biologicals. “Current” refers to drugs or biologicals that are outpatient hospital services under Part B for which payment was made on the first date the hospital OPPS was implemented.

Transitional pass-through payments are also provided for certain “new” drugs and biologicals that were not being paid for as an HOPD service as of December 31, 1996 and whose cost is “not insignificant” in relation to the OPPS payments for the procedures or services associated with the new drug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” As required by statute, transitional pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a period of at least 2 years, but not more than 3 years, after the payment was first made for the product as a hospital outpatient service under Medicare Part B. Proposed CY 2014 pass-through drugs and biologicals and their designated APCs are assigned status indicator “G” in Addenda A and B to this proposed rule, which are available via the Internet on the CMS Web site.

Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment amount, in the case of a drug or biological, is the amount by which the amount determined under section 1842(o) of the Act for the drug or biological exceeds the portion of the otherwise applicable Medicare OPD fee schedule that the Secretary determines is associated with the drug or biological. If the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the pass-through payment amount is determined by the Secretary to be equal to the average price for the drug or biological for all competitive acquisition areas and the year established under such section as calculated and adjusted by the Secretary. However, we note that the Part B drug CAP program has been postponed since CY 2009, and such a program has not been reinstated for CY 2014.

This methodology for determining the pass-through payment amount is set forth in regulations at 42 CFR 419.64. These regulations specify that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determines is associated with the drug or biological. Section 1847A of the Act establishes the average sales price (ASP) methodology, which is used for payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses several sources of data as a basis for payment, including the ASP, the wholesale acquisition cost (WAC), and the average wholesale price (AWP). In this proposed rule, the term “ASP methodology” and “ASP-based” are inclusive of all data sources and methodologies described therein. Additional information on the ASP methodology can be found on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Part-B-Drugs/​McrPartBDrugAvgSalesPrice/​index.html.

We are proposing that the pass-through status of 15 drugs and biologicals would expire on December 31, 2013, as listed in Table 19 below. All of these drugs and biologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2013. These drugs and biologicals were approved for pass-through status on or before January 1, 2012. With the exception of those groups of drugs and biologicals that are always packaged when they do not have pass-through status, specifically diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, and our new proposed groups of policy packaged products described in section II.A.3. of this proposed rule, namely drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure, our standard methodology for providing payment for drugs and biologicals with expiring pass-through status in an upcoming calendar year is to determine the product's estimated per day cost and compare it with the OPPS drug packaging threshold for that calendar year (which is proposed at $90 for CY 2014), as discussed further in section V.B.2. of this proposed rule. If the estimated per day cost for the drug or biological is less than or equal to the applicable OPPS drug packaging threshold, we would package payment for the drug or biological into the payment for the associated procedure in the upcoming calendar year. If the estimated per day cost of the drug or biological is greater than the OPPS drug packaging threshold, we would provide separate payment at the applicable relative ASP-based payment amount (which is proposed at ASP+6 percent for Start Printed Page 43599CY 2014, as discussed further in section V.B.3. of this proposed rule).

Table 19—Proposed Drugs and Biologicals for Which Pass-Through Status Will Expire December 31, 2013

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing Pass-Through Status in CY 2014

We are proposing to continue pass-through status in CY 2014 for 18 drugs and biologicals. None of these drugs and biologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2013. These drugs and biologicals, which were approved for pass-through status between April 1, 2012 and July 1, 2013, are listed in Table 20 below. The APCs and HCPCS codes for these drugs and biologicals approved for pass-through status through April 1, 2013 are assigned status indicator “G” in Addenda A and B of this proposed rule. Addenda A and B of this proposed rule are available via the Internet on the CMS Web site.

Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for pass-through drugs and biologicals (the pass-through payment amount) as the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Payment for drugs and biologicals with pass-through status under the OPPS is currently made at the physician's office payment rate of ASP+6 percent. We believe it is consistent with the statute to propose to continue to provide payment for drugs and biologicals with pass-through status at a rate of ASP+6 percent in CY 2014, the amount that drugs and biologicals receive under section 1842(o) of the Act.

Therefore, for CY 2014, we are proposing to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the rate these drugs and biologicals would receive in the physician's office setting in CY 2014. We are proposing that a $0.00 pass-through payment amount would be paid for most pass-through drugs and biologicals under the CY 2014 OPPS because the difference between the amount authorized under section 1842(o) of the Act, which is ASP+6 percent, and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is appropriate, proposed at ASP+6 percent, is $0.

In the case of pass-through for policy packaged drugs (which include contrast agents, diagnostic radiopharmaceuticals, anesthesia drugs, and our new proposed groups of policy packaged products described in section II.A.3. of this proposed rule, namely drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure), we are proposing that their pass-through payment amount would be equal to ASP+6 percent for CY 2014 because, if not on pass-through status, payment for these products would be packaged into the associated procedure.

In addition, we are proposing to continue to update pass-through payment rates on a quarterly basis on the CMS Web site during CY 2014 if later quarter ASP submissions (or more recent WAC or AWP information, as applicable) indicate that adjustments to the payment rates for these pass-through drugs or biologicals are necessary. For a full description of this policy, we refer readers to the CY 2006 OPPS/ASC final rule with comment period (70 FR 42722 and 42723).

In CY 2014, as is consistent with our CY 2013 policy for diagnostic and therapeutic radiopharmaceuticals, we are proposing to provide payment for both diagnostic and therapeutic radiopharmaceuticals that are granted pass-through status based on the ASP methodology. As stated above, for purposes of pass-through payment, we consider radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through status during CY 2014, we are proposing to follow the standard ASP methodology to determine the pass-through payment rate that drugs receive under section 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we are proposing to provide pass-through payment at WAC+6 percent, the equivalent payment provided to pass-through drugs and biologicals without ASP information. If WAC information is also not available, we are proposing to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.

As discussed in more detail in section II.A.3. of this proposed rule, over the last 6 years, we implemented a policy whereby payment for all nonpass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs is packaged into payment for the associated procedure. Start Printed Page 43600We are proposing to continue the packaging of these items and also are proposing new groups of policy packaged products described in section II.A.3. of this proposed rule, namely drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure, regardless of their per day cost, in CY 2014. As stated earlier, pass-through payment is the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Because payment for a drug that is policy packaged would otherwise be packaged if the product did not have pass-through status, we believe the otherwise applicable OPPS payment amount would be equal to the policy packaged drug APC offset amount for the associated clinical APC in which the drug or biological is utilized. The proposed calculation of the policy packaged drug APC offset amounts is described in more detail in section IV.A.2. of this proposed rule. It follows that the copayment for the nonpass-through payment portion (the otherwise applicable fee schedule amount that we would also offset from payment for the drug or biological if a payment offset applies) of the total OPPS payment for those drugs and biologicals would, therefore, be accounted for in the copayment for the associated clinical APC in which the drug or biological is used.

According to section 1833(t)(8)(E) of the Act, the amount of copayment associated with pass-through items is equal to the amount of copayment that would be applicable if the pass-through adjustment was not applied. Therefore, as we did in CY 2013, we are proposing to continue to set the associated copayment amount to zero for CY 2014 for pass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs that would otherwise be packaged if the item did not have pass-through status. We also are proposing to set the associated copayment amount to zero for the additional categories of policy-packaged products proposed for CY 2014 described in section II.A.3. of this proposed rule.

The separate OPPS payment to a hospital for the pass-through diagnostic radiopharmaceutical, contrast agent, anesthesia drug, and the additional categories of policy-packaged products proposed for CY 2014 is not subject to a copayment according to the statute. Therefore, we are proposing to not publish a copayment amount for these items in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site).

For CY 2013, we estimated the OPPS pass-through payment for drugs and biologicals to be $22 million. Our proposed OPPS pass-through payment estimate for drugs and biologicals in CY 2014 is $1 million, which is discussed in section VI.B. of this proposed rule. The 18 drugs and biologicals that we are proposing to continue on pass-through status for CY 2014 or have been granted pass-through status as of July 2013 are displayed in Table 20 below.

* Because the payment rates associated with these codes effective July 1, 2013 are not available to us in time for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2013 OPPS quarterly update CR could not be included in Addendum B to this proposed rule.

Start Printed Page 43601

4. Proposed Provisions for Reducing Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals; Contrast Agents; Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure; and Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure to Offset Costs Packaged Into APC Groups

a. Background

Prior to CY 2008, diagnostic radiopharmaceuticals and contrast agents were paid separately under the OPPS if their mean per day costs were greater than the applicable year's drug packaging threshold. In CY 2008 (72 FR 66768), we began a policy of packaging payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents as ancillary and supportive items and services into their associated nuclear medicine procedures. Therefore, beginning in CY 2008, nonpass-through diagnostic radiopharmaceuticals and contrast agents were not subject to the annual OPPS drug packaging threshold to determine their packaged or separately payable payment status, and instead all nonpass-through diagnostic radiopharmaceuticals and contrast agents were packaged as a matter of policy. For CY 2014, we are proposing to continue to package payment for all nonpass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs and to begin packaging all nonpass-through drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure, as discussed in section II.A.3. of this proposed rule.

b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals

As previously noted, radiopharmaceuticals are considered to be drugs for OPPS pass-through payment purposes. As described above, section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. There is currently one radiopharmaceutical with pass-through status under the OPPS, HCPCS code A9584 (Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries). This product, which is presently referred to using HCPCS code A9584, was granted pass-through status using HCPCS code C9406 beginning July 1, 2011, and we are proposing that its pass-through status would expire on December 31, 2013. We currently apply the established radiopharmaceutical payment offset policy to pass-through payment for this product. As described earlier in section V.A.3. of this proposed rule, we are proposing that new pass-through diagnostic radiopharmaceuticals would be paid at ASP+6 percent, while those new pass-through diagnostic radiopharmaceuticals without ASP information would be paid at WAC+6 percent or, if WAC is not available, payment would be based on 95 percent of the product's most recently published AWP.

Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for diagnostic radiopharmaceuticals an amount reflecting the portion of the APC payment associated with predecessor radiopharmaceuticals in order to ensure no duplicate radiopharmaceutical payment is made. In CY 2009, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 through 68641). Specifically, we use the policy packaged drug offset fraction for APCs containing nuclear medicine procedures, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy packaged drugs divided by the cost from single procedure claims in the APC.

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 through 60484), we finalized a policy to redefine policy packaged drugs as only nonpass-through diagnostic radiopharmaceuticals and contrast agents, as a result of the policy discussed in sections V.A.4. and V.B.2.d. of the CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 through 60477 and 60495 through 60499, respectively) that treats nonpass-through implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and implantable biologicals that are surgically inserted or implanted (through a surgical incision or a natural orifice) with newly approved pass-through status beginning in CY 2010 or later as devices, rather than drugs. To determine the actual APC offset amount for pass-through diagnostic radiopharmaceuticals that takes into consideration the otherwise applicable OPPS payment amount, we multiply the policy packaged drug offset fraction by the APC payment amount for the nuclear medicine procedure with which the pass-through diagnostic radiopharmaceutical is used and, accordingly, reduce the separate OPPS payment for the pass-through diagnostic radiopharmaceutical by this amount.

Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71934 through 71936), we finalized a policy to require hospitals to append modifier “FB” to specified nuclear medicine procedures and to report a token charge of less than $1.01 in cases in which the diagnostic radiopharmaceutical is received without cost or with full credit. Beginning in CY 2014, we are proposing to no longer require hospitals to append modifier “FB” to specified nuclear medicine procedures or to report a token charge of less than $1.01 in cases in which the diagnostic radiopharmaceutical is received at no cost/full credit. Under this proposed policy, the OPPS payment amount for nuclear medicine procedures would not be reduced when a diagnostic radiopharmaceutical is received at no cost or full credit. Based on claims data, it appears that hospitals rarely receive diagnostic radiopharmaceuticals at no cost or full credit and, therefore, we do not believe that the burden on hospitals of adhering to the nuclear medicine “FB” modifier policy continues to be warranted.

For CY 2013, we finalized a policy to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals, as described above. For CY 2014, we are proposing to continue to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals.

Table 21 below displays the proposed APCs to which nuclear medicine procedures would be assigned in CY 2014 and for which we expect that an APC offset could be applicable in the case of diagnostic radiopharmaceuticals with pass-through status.Start Printed Page 43602

Table 21—Proposed APCs To Which Nuclear Medicine Procedures Would Be Assigned for CY 2014

Proposed CY 2014 APC

Proposed CY 2014 APC title

0308

Positron Emission Tomography (PET) Imaging.

0377

Level II Cardiac Imaging.

0378

Level II Pulmonary Imaging.

0389

Level I Non-imaging Nuclear Medicine.

0390

Level I Endocrine Imaging.

0391

Level II Endocrine Imaging.

0392

Level II Non-imaging Nuclear Medicine.

0393

Hematologic Processing & Studies.

0394

Hepatobiliary Imaging.

0395

GI Tract Imaging.

0396

Bone Imaging.

0397

Vascular Imaging.

0398

Level I Cardiac Imaging.

0400

Hematopoietic Imaging.

0401

Level I Pulmonary Imaging.

0402

Level II Nervous System Imaging.

0403

Level I Nervous System Imaging.

0404

Renal and Genitourinary Studies.

0406

Level I Tumor/Infection Imaging.

0408

Level III Tumor/Infection Imaging.

0414

Level II Tumor/Infection Imaging.

c. Proposed Payment Offset Policy for Contrast Agents

Section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. There currently are no contrast agents with pass-through status under the OPPS. As described in section V.A.3. of this proposed rule, we are proposing that new pass-through contrast agents would be paid at ASP+6 percent, while those new pass-through contrast agents without ASP information would be paid at WAC+6 percent or, if WAC is not available, payment would be based on 95 percent of the product's most recently published AWP.

Although there are currently no contrast agents with pass-through status, we believe that a payment offset is necessary in the event that a new contrast agent is approved for pass-through status during CY 2014 in order to provide an appropriate transitional pass-through payment for new contrast agents because all of these items are packaged when they do not have pass-through status. In accordance with our standard offset methodology, we are proposing for CY 2014 to deduct from the payment for new pass-through contrast agents that are approved for pass-through status as a drug or biological during CY 2014, an amount that reflects the portion of the APC payment associated with predecessor contrast agents, in order to ensure no duplicate contrast agent payment is made.

In CY 2010, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor contrast agents when considering new contrast agents for pass-through payment (74 FR 60482 through 60484). For CY 2014, as we did in CY 2013, we are proposing to continue to apply this same policy to contrast agents. Specifically, we are proposing to utilize the policy packaged drug offset fraction for procedural APCs, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy packaged drugs divided by the cost from single procedure claims in the APC. To determine the actual APC offset amount for pass-through contrast agents that takes into consideration the otherwise applicable OPPS payment amount, we are proposing to multiply the policy packaged drug offset fraction by the APC payment amount for the procedure with which the pass-through contrast agent is used and, accordingly, reduce the separate OPPS payment for the pass-through contrast agent by this amount. We are proposing to continue to apply this methodology for CY 2014 to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 22 of this proposed rule, a specific offset based on the procedural APC would be applied to the payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent.

Proposed procedural APCs for which we expect a contrast offset could be applicable in the case of a pass-through contrast agent have been identified as any procedural APC with a policy packaged drug amount greater than $20 that is not a nuclear medicine APC identified in Table 21 above, and these APCs are displayed in Table 22 below. The methodology used to determine a proposed threshold cost for application of a contrast agent offset policy is described in detail in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60483 through 60484). For CY 2014, we are proposing to continue to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 22, a specific offset based on the procedural APC would be applied to the payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent.

Table 22—Proposed APCs To Which a Contrast Agent Offset May Be Applicable for CY 2014

Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast.

Start Printed Page 43603

0375

Ancillary Outpatient Services When Patient Expires.

0383

Cardiac Computed Tomographic Imaging.

0388

Discography.

0442

Dosimetric Drug Administration.

0653

Vascular Reconstruction/Fistula Repair with Device.

0656

Transcatheter Placement of Intracoronary Drug-Eluting Stents.

0662

CT Angiography.

0668

Level I Angiography and Venography.

8006

CT and CTA with Contrast Composite.

8008

MRI and MRA with Contrast Composite.

d. Proposed Payment Offset Policy for Products Packaged According to the Proposed Policy to Package Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure and Drugs and Biologicals That Function as Supplies or Devices When Used in a Surgical Procedure

Section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. As discussed in section II.A.3. of this proposed rule, as a part of our proposed policy to package drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure, we are specifically proposing that skin substitutes and stress agents used in myocardial perfusion imaging (MPI) be policy packaged in CY 2014, in addition to diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs. We believe that a payment offset, similar to the offset currently in place for pass-through devices, diagnostic radiopharmaceuticals, and contrast agents, is necessary in order to provide an appropriate transitional pass-through payment for drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure because all of these are packaged, or proposed to be packaged, when they do not have pass-through status. In accordance with our standard offset methodology, we are proposing for CY 2014 to deduct from the payment for pass-through drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure an amount that reflects the portion of the APC payment associated with predecessor products in order to ensure no duplicate payment is made.

In CY 2009, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 through 68641). For CY 2014, we are proposing to apply this same policy to drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure. Specifically, in the case of pass-through skin substitutes, we are proposing to utilize the policy packaged drug offset fraction for skin substitute procedural APCs, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy packaged drugs divided by the cost from single procedure claims in the APC. Because policy packaged radiopharmaceuticals also would be included in the drug offset fraction for the APC to which MPI procedures are assigned, in the case of pass-through stress agents, we are proposing to utilize the policy packaged drug offset fraction for the procedural APC, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy packaged drugs excluding policy packaged diagnostic radiopharmaceuticals divided by the cost from single procedure claims in the APC. To determine the actual APC offset amount for pass-through skin substitutes and pass-through stress agents that takes into consideration the otherwise applicable OPPS payment amount, we are proposing to multiply the policy-packaged drug offset fraction by the APC payment amount for the procedure with which the pass-through skin substitute or pass-through stress agent is used and, accordingly, reduce the separate OPPS payment for the pass-through skin substitute or pass-through stress agent by this amount.

Table 23 below displays the proposed APCs to which skin substitute procedures would be assigned in CY 2014 and for which we expect that an APC offset could be applicable in the case of skin substitutes with pass-through status.

Table 24 below displays the proposed APC to which MPI procedures would be assigned in CY 2014 and for which we expect that an APC offset could be applicable in the case of a stress agent with pass-through status.

We are proposing to continue to post annually on the CMS Web site at http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Payment/​HospitalOutpatientPPS/​index.html a file that contains the APC offset amounts that will be used for that year for purposes of both evaluating cost significance for candidate pass-through device categories and drugs and biologicals and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide the amounts and percentages of APC payment associated with packaged implantable devices, policy packaged drugs, and threshold packaged drugs and biologicals for every OPPS clinical APC.Start Printed Page 43604

Table 23—Proposed APCs To Which Skin Substitute Procedures Would Be Assigned for CY 2014

Proposed CY 2014 APC

Proposed CY 2014 APC title

0135

Level III Skin Repair.

0136

Level IV Skin Repair.

Table 24—Proposed APCs To Which MPI Procedures Would Be Assigned for CY 2014

1. Background

Under the CY 2013 OPPS, we currently pay for drugs, biologicals, and radiopharmaceuticals that do not have pass-through status in one of two ways: As a packaged payment included in the payment for the associated service, or as a separate payment (individual APCs). We explained in the April 7, 2000 OPPS final rule with comment period (65 FR 18450) that we generally package the cost of drugs and radiopharmaceuticals into the APC payment rate for the procedure or treatment with which the products are usually furnished. Hospitals do not receive separate payment for packaged items and supplies, and hospitals may not bill beneficiaries separately for any packaged items and supplies whose costs are recognized and paid within the national OPPS payment rate for the associated procedure or service. (Transmittal A-01-133, issued on November 20, 2001, explains in greater detail the rules regarding separate payment for packaged services.)

Packaging costs into a single aggregate payment for a service, procedure, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, packaging the costs of items and services into the payment for the primary procedure or service with which they are associated encourages hospital efficiencies and also enables hospitals to manage their resources with maximum flexibility.

a. Background

As indicated in section V.B.1. of this proposed rule, in accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate APCs for payment of drugs and biologicals was set to $50 per administration during CYs 2005 and 2006. In CY 2007, we used the four quarter moving average Producer Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) to trend the $50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold became effective) to the third quarter of CY 2007. We then rounded the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 threshold amount of $55. Using the same methodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086)), we set the packaging threshold for establishing separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009. For CY 2010, we set the packaging threshold at $65; for CY 2011, we set the packaging threshold at $70; for CY 2012, we set the packaging threshold at $75; and for CY 2013, we set the packaging threshold at $80.

Following the CY 2007 methodology, for this CY 2014 OPPS/ASC proposed rule, we used the most recently available four quarter moving average PPI levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter of CY 2014 and rounded the resulting dollar amount ($87.70) to the nearest $5 increment, which yielded a figure of $90. In performing this calculation, we used the most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS' Office of the Actuary (OACT). (We note that we are not proposing a change to the PPI that is used to calculate the threshold for CY 2014; rather, this change in terminology reflects a change to the BLS naming convention for this series.) We refer below to this series generally as the PPI for Prescription Drugs.

We chose the PPI for Prescription Drugs as it reflects price changes associated with the average mix of all pharmaceuticals in the overall economy. In addition, we chose this price series because it is publicly available and regularly published, improving public access and transparency. Forecasts of the PPI for Prescription Drugs are developed by IHS Global Insight, Inc., a nationally recognized economic and financial forecasting firm. As actual inflation for past quarters replaced forecasted amounts, the PPI estimates for prior quarters have been revised (compared with those used in the CY 2007 OPPS/ASC final rule with comment period) and have been incorporated into our calculation. Based on the calculations described above, we are proposing a packaging threshold for CY 2014 of $90. (For a more detailed discussion of the OPPS drug packaging threshold and the use of the PPI for Prescription Drugs, we refer readers to the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086).)

To determine the proposed CY 2014 packaging status for all nonpass-through drugs and biologicals that are not policy packaged for this proposed rule, we calculated, on a HCPCS code-specific basis, the per day cost of all drugs, biologicals, and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPCS code in CY 2012 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2012 claims processed before January 1, 2013 for this calculation. However, we did not perform this calculation for those drugs and biologicals with multiple HCPCS codes that include different dosages, as described in section V.B.2.c. of this proposed rule, or for diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, and implantable biologicals that we are proposing to continue to package in CY 2014, or for the new categories of policy-packaged products proposed for CY 2014, as discussed in section II.A.3. of this proposed rule.

In order to calculate the per day costs for drugs, biologicals, and therapeutic radiopharmaceuticals to determine their proposed packaging status in CY 2014, we used the methodology that was described in detail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 70 FR 68638). For each drug and biological HCPCS code, we used an estimated payment rate of ASP+6 percent (which is the payment rate we are proposing for separately Start Printed Page 43605payable drugs and biologicals for CY 2014, as discussed in more detail in section V.B.3.b. of this proposed rule) to calculate the CY 2014 proposed rule per day costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2012 (data that were used for payment purposes in the physician's office setting, effective April 1, 2013) to determine the proposed rule per day cost.

As is our standard methodology, for CY 2014, we are proposing to use payment rates based on the ASP data from the fourth quarter of CY 2012 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site) because these are the most recent data available for use at the time of development of this proposed rule. These data also were the basis for drug payments in the physician's office setting, effective April 1, 2013. For items that did not have an ASP-based payment rate, such as some therapeutic radiopharmaceuticals, we used their mean unit cost derived from the CY 2012 hospital claims data to determine their per day cost.

We are proposing to package items with a per day cost less than or equal to $90, and identify items with a per day cost greater than $90 as separately payable. Consistent with our past practice, we crosswalked historical OPPS claims data from the CY 2012 HCPCS codes that were reported to the CY 2013 HCPCS codes that we display in Addendum B of this proposed rule (which is available via the Internet on the CMS Web site) for payment in CY 2014.

Our policy during previous cycles of the OPPS has been to use updated ASP and claims data to make final determinations of the packaging status of HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals for the OPPS/ASC final rule with comment period. We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/ASC final rule with comment period for the update year. Only HCPCS codes that are identified as separately payable in the final rule with comment period will be subject to quarterly updates. For our calculation of per day costs of HCPCS codes for drugs and biologicals in the CY 2014 OPPS/ASC final rule with comment period, we are proposing to use ASP data from the first quarter of CY 2013, which is the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective July 1, 2013, along with updated hospital claims data from CY 2012. We note that we also are proposing to use these data for budget neutrality estimates and impact analyses for the CY 2014 OPPS/ASC final rule with comment period.

Payment rates for HCPCS codes for separately payable drugs and biologicals included in Addenda A and B to the final rule with comment period will be based on ASP data from the second quarter of CY 2013. These data will be the basis for calculating payment rates for drugs and biologicals in the physician's office setting using the ASP methodology, effective October 1, 2013. These physician's office payment rates would then be updated in the January 2014 OPPS update, based on the most recent ASP data to be used for physician's office and OPPS payment as of January 1, 2014. For items that do not currently have an ASP-based payment rate, we are proposing to recalculate their mean unit cost from all of the CY 2012 claims data and updated cost report information available for the CY 2014 final rule with comment period to determine their final per day cost.

Consequently, the packaging status of some HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals in this CY 2014 OPPS/ASC proposed rule may be different from the same drug HCPCS code's packaging status determined based on the data used for the CY 2014 OPPS/ASC final rule with comment period. Under such circumstances, we are proposing to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose cost fluctuates relative to the proposed CY 2014 OPPS drug packaging threshold and the drug's payment status (packaged or separately payable) in CY 2013. Specifically, for CY 2014, consistent with our historical practice, we are proposing to apply the following policies to these HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the drug packaging threshold changes based on the updated drug packaging threshold and on the final updated data:

HCPCS codes for drugs and biologicals that were paid separately in CY 2013 and that are proposed for separate payment in CY 2014, and that then have per day costs equal to or less than the CY 2014 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2014 final rule, would continue to receive separate payment in CY 2014.

HCPCS codes for drugs and biologicals that were packaged in CY 2013 and that are proposed for separate payment in CY 2014, and that then have per day costs equal to or less than the CY 2014 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2014 final rule, would remain packaged in CY 2014.

HCPCS codes for drugs and biologicals for which we are proposing packaged payment in CY 2014 but then have per day costs greater than the CY 2014 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2014 final rule, would receive separate payment in CY 2014.

c. Proposed Packaging Determination for HCPCS Codes That Describe the Same Drug or Biological But Different Dosages

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66776), we began recognizing, for OPPS payment purposes, multiple HCPCS codes reporting different dosages for the same covered Part B drugs or biologicals in order to reduce hospitals' administrative burden by permitting them to report all HCPCS codes for drugs and biologicals. In general, prior to CY 2008, the OPPS recognized for payment only the HCPCS code that described the lowest dosage of a drug or biological. We extended this recognition to multiple HCPCS codes for several other drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, we applied a policy that assigned the status indicator of the previously recognized HCPCS code to the associated newly recognized code(s), reflecting the packaged or separately payable status of the new code(s). In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we explained that once claims data were available for these previously unrecognized HCPCS codes, we would determine the packaging status and resulting status indicator for each HCPCS code according to the general, established HCPCS code-specific methodology for determining a code's packaging status for a given update year. However, we also stated that we planned to closely follow our claims data to ensure that our annual packaging determinations for the different HCPCS codes describing the same drug or biological did not create inappropriate payment incentives for hospitals to report certain HCPCS codes instead of others.

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490Start Printed Page 43606through 60491), we finalized a policy to make a single packaging determination for a drug, rather than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages. We analyzed CY 2008 claims data for the HCPCS codes describing different dosages of the same drug or biological that were newly recognized in CY 2008 and found that our claims data would result in several different packaging determinations for different codes describing the same drug or biological. Furthermore, we found that our claims data included few units and days for a number of newly recognized HCPCS codes, resulting in our concern that these data reflected claims from only a small number of hospitals, even though the drug or biological itself may be reported by many other hospitals under the most common HCPCS code. Based on these findings from our first available claims data for the newly recognized HCPCS codes, we believed that adopting our standard HCPCS code-specific packaging determinations for these codes could lead to payment incentives for hospitals to report certain HCPCS codes instead of others, particularly because we do not currently require hospitals to report all drug and biological HCPCS codes under the OPPS in consideration of our previous policy that generally recognized only the lowest dosage HCPCS code for a drug or biological for OPPS payment.

For CY 2014, we continue to believe that adopting the standard HCPCS code-specific packaging determinations for these codes could lead to payment incentives for hospitals to report certain HCPCS codes for drugs instead of others. Making packaging determinations on a drug-specific basis eliminates these incentives and allows hospitals flexibility in choosing to report all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Therefore, we are proposing to continue our policy to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes that describe the same drug or biological but different dosages in CY 2014.

For CY 2014, in order to propose a packaging determination that is consistent across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2012 claims data and our pricing information at ASP+6 percent across all of the HCPCS codes that describe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descriptor. We then multiplied the weighted average ASP+6 percent per unit payment amount across all dosage levels of a specific drug or biological by the estimated units per day for all HCPCS codes that describe each drug or biological from our claims data to determine the estimated per day cost of each drug or biological at less than or equal to $90 (so that all HCPCS codes for the same drug or biological would be packaged) or greater than $90 (so that all HCPCS codes for the same drug or biological would be separately payable). The following drugs did not have pricing information available for the ASP methodology for this CY 2014 OPPS/ASC proposed rule and, as is our current policy for determining the packaging status of other drugs, we used the mean unit cost available from the fourth quarter CY 2012 claims data to make the packaging determinations for these drugs: HCPCS codes J3471 (Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units)); J3472 (Injection, hyaluronidase, ovine, preservative free, per 1000 usp units); Q0171 (Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen); Q0172 (Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen); Q0175 (Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen); Q0176 (Perphenazine, 8 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen); Q0177 (Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen); and Q0178 (Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen). The proposed packaging status of each drug and biological HCPCS code to which this methodology would apply is displayed in Table 25 below.

Prochlorperazine maleate, 5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0165

Prochlorperazine maleate, 10 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0167

Dronabinol, 2.5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0168

Dronabinol, 5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0169

Promethazine hydrochloride, 12.5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0170

Promethazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0171

Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0172

Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0175

Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0176

Perphenazine, 8 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0177

Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

Q0178

Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen

N

3. Proposed Payment for Drugs and Biologicals Without Pass-Through Status That Are Not Packaged

Section 1833(t)(14) of the Act defines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” (known as a SCOD) is defined as a covered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a separate APC has been established and that either is a radiopharmaceutical agent or is a drug or biological for which payment was made on a pass-through basis on or before December 31, 2002.

Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and biologicals are designated as exceptions and are not included in the definition of SCODs. These exceptions are—

A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.

A drug or biological for which a temporary HCPCS code has not been assigned.

During CYs 2004 and 2005, an orphan drug (as designated by the Secretary).

Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the drug for that year as determined by the Secretary, subject to any adjustment for overhead costs and taking into account the hospital acquisition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Start Printed Page 43608Most physician Part B drugs are paid at ASP+6 percent pursuant to section 1842(o) and section 1847A of the Act.

Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in OPPS payment rates for SCODs to take into account overhead and related expenses, such as pharmacy services and handling costs. Section 1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead and related expenses and to make recommendations to the Secretary regarding whether, and if so how, a payment adjustment should be made to compensate hospitals for overhead and related expenses. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the weights for ambulatory procedure classifications for SCODs to take into account the findings of the MedPAC study.

It has been our longstanding policy to apply the same treatment to all separately payable drugs and biologicals, which include SCODs, and drugs and biologicals that are not SCODs. Therefore, we apply the payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, as required by statute, but we also apply it to separately payable drugs and biologicals that are not SCODs, which is a policy determination rather than a statutory requirement. In this CY 2014 OPPS/ASC proposed rule, we are proposing to apply section 1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and biologicals, including SCODs. Although we do not distinguish SCODs in this discussion, we note that we are required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying this provision to other separately payable drugs and biologicals, consistent with our history of using the same payment methodology for all separately payable drugs and biologicals.

Since CY 2006, we have attempted to establish a drug payment methodology that reflects hospitals' acquisition costs for drugs and biologicals while taking into account relevant pharmacy overhead and related handling expenses. We have attempted to collect more data on hospital overhead charges for drugs and biologicals by making several proposals that would require hospitals to change the way they report the cost and charges for drugs. None of these proposals were adopted due to significant stakeholder concern, including that hospitals stated that it would be administratively burdensome to report hospital overhead charges. We established a payment policy for separately payable drugs and biologicals, authorized by section 1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is calculated by comparing the estimated aggregate cost of separately payable drugs and biologicals in our claims data to the estimated aggregate ASP dollars for separately payable drugs and biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642). We referred to this methodology as our standard drug payment methodology.

In CY 2010, taking into consideration comments made by the pharmacy stakeholders and acknowledging the limitations of the reported data due to charge compression and hospitals' reporting practices, we added an “overhead adjustment” (an internal adjustment of the data) by redistributing cost from coded and uncoded packaged drugs and biologicals to separately payable drugs in order to provide more appropriate payments for drugs and biologicals in the HOPD. We continued this overhead adjustment methodology through CY 2012, and further refined our overhead adjustment methodology by finalizing a policy to update the redistribution amount for inflation and to keep the redistribution ratio constant between the proposed rule and the final rule. For a detailed discussion of our OPPS drug payment policies from CY 2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68383 through 68385).

We noted in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386) that application of the standard drug payment methodology, with the overhead adjustment, has always yielded a finalized payment rate in the range of ASP+4 percent to ASP+6 percent for nonpass-through separately payable drugs. We stated that the historic ASP+4 to ASP+6 percentage range is an appropriate payment rate for separately payable drugs and biologicals administered within the HOPD, including acquisition and pharmacy overhead and related expenses. However, because of continuing uncertainty about the full cost of pharmacy overhead and acquisition cost, based in large part on the limitations of the submitted hospital charge and claims data for drugs, we indicated our concern that the continued use of the standard drug payment methodology (including the overhead adjustment) still may not appropriately account for average acquisition and pharmacy overhead cost and, therefore, may result in payment rates that are not as predictable, accurate, or appropriate as they could be.

In that final rule with comment period, we discussed that section 1833(t)(14)(A)(iii)(II) of the Act requires an alternative methodology for determining payment rates for SCODs wherein, if hospital acquisition cost data are not available, payment shall be equal (subject to any adjustment for overhead costs) to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386), we noted that section 1833(t)(14)(A)(iii)(II) of the Act authorizes the Secretary to calculate and adjust, as necessary, the average price for a drug in the year established under section 1842(o), 1847A, or 1847B of the Act, as the case may be, in determining payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, Part B drugs are paid at ASP+6 percent when furnished in physicians' offices. We indicated that we believe that establishing the payment rates based on the statutory default of ASP+6 percent is appropriate as it yields increased predictability in payment for separately payable drugs and biologicals under the OPPS. We also noted that ASP+6 percent is an appropriate payment amount because it is consistent with payment amounts yielded by our drug payment methodologies over the past 7 years. Therefore, considering stakeholder and provider feedback, continued limitations of the hospital claims and cost data on drugs and biologicals, and Panel recommendations, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68389), we finalized our proposal for CY 2013 to pay for separately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act, referred to as the statutory default. We also finalized our proposal that the ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment, and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals and that payments for separately payable drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payments for these separately paid drugs and biological for CY 2013 (77 FR 68389).

b. Proposed CY 2014 Payment Policy

For CY 2014, we are proposing to continue our CY 2013 policy and pay Start Printed Page 43609for separately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act, referred to as the statutory default. We are proposing that the ASP+6 percent payment amount for separately payable drugs and biologicals requires no further adjustment, and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals. We also are proposing that payments for separately payable drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payments for these separately paid drugs and biologicals.

4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals

Beginning in CY 2010 and continuing for CY 2013, we established a policy to pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biologicals. If ASP information is unavailable for a therapeutic radiopharmaceutical, we base therapeutic radiopharmaceutical payment on mean unit cost data derived from hospital claims. We believe that the rationale outlined in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) for applying the principles of separately payable drug pricing to therapeutic radiopharmaceuticals continues to be appropriate for nonpass-through separately payable therapeutic radiopharmaceuticals in CY 2014. Therefore, we are proposing for CY 2014 to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals at ASP+6 percent, based on the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full discussion of ASP-based payment for therapeutic radiopharmaceuticals, we refer readers to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521). We also are proposing to rely on CY 2012 mean unit cost data derived from hospital claims data for payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable and to update the payment rates for separately payable therapeutic radiopharmaceuticals, according to our usual process for updating the payment rates for separately payable drugs and biologicals, on a quarterly basis if updated ASP information is available. For a complete history of the OPPS payment policy for therapeutic radiopharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811), the CY 2006 OPPS final rule with comment period (70 FR 68655), and the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524).

The proposed CY 2014 payment rates for nonpass-through separately payable therapeutic radiopharmaceuticals are included in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site).

5. Proposed Payment for Blood Clotting Factors

For CY 2013, we provided payment for blood clotting factors under the same methodology as other nonpass-through separately payable drugs and biologicals under the OPPS and continued paying an updated furnishing fee. That is, for CY 2013, we provided payment for blood clotting factors under the OPPS at ASP+6 percent, plus an additional payment for the furnishing fee. We note that when blood clotting factors are provided in physicians' offices under Medicare Part B and in other Medicare settings, a furnishing fee is also applied to the payment. The CY 2013 updated furnishing fee was $0.188 per unit.

For CY 2014, we are proposing to pay for blood clotting factors at ASP+6 percent, consistent with our proposed payment policy for other nonpass-through separately payable drugs and biologicals, and to continue our policy for payment of the furnishing fee using an updated amount. Our policy to pay for a furnishing fee for blood clotting factors under the OPPS is consistent with the methodology applied in the physician office and inpatient hospital setting, and first articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and later discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). The proposed furnishing fee update is based on the percentage increase in the Consumer Price Index (CPI) for medical care for the 12-month period ending with June of the previous year. Because the Bureau of Labor Statistics releases the applicable CPI data after the MPFS and OPPS/ASC proposed rules are published, we are not able to include the actual updated furnishing fee in the proposed rules. Therefore, in accordance with our policy, as finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we are proposing to announce the actual figure for the percent change in the applicable CPI and the updated furnishing fee calculated based on that figure through applicable program instructions and posting on the CMS Web site at: http://www.cms.gov/​Medicare/​Medicare-Fee-for-Service-Part-B-Drugs/​McrPartBDrugAvgSalesPrice/​index.html.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) did not address the OPPS payment in CY 2005 and subsequent years for drugs, biologicals, and radiopharmaceuticals that have assigned HCPCS codes, but that do not have a reference AWP or approval for payment as pass-through drugs or biologicals. Because there was no statutory provision that dictated payment for such drugs, biologicals, and radiopharmaceuticals in CY 2005, and because we had no hospital claims data to use in establishing a payment rate for them, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799).

For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS codes (specifically those new drug, biological, and radiopharmaceutical HCPCS codes in each of those calendar years that did not crosswalk to predecessor HCPCS codes) but which did not have pass-through status, at a rate that was equivalent to the payment they received in the physician's office setting, established in accordance with the ASP methodology for drugs and biologicals, and based on charges adjusted to cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a policy to provide payment for new drugs (excluding contrast agents and diagnostic radiopharmaceuticals) and biologicals (excluding implantable biologicals for CY 2009) with HCPCS codes, but which did not have pass-through status and were without OPPS hospital claims data, at ASP+5 percent and ASP+4 percent, respectively, consistent with the final OPPS payment methodology for other separately payable drugs and biologicals. New therapeutic radiopharmaceuticals were paid at charges adjusted to cost based on the statutory requirement for CY 2008 and CY 2009 and payment for new diagnostic radiopharmaceuticals was packaged in both years.

For CY 2010, we continued to provide payment for new drugs (excluding contrast agents) and biologicals with Start Printed Page 43610HCPCS codes that do not have pass-through status and are without OPPS hospital claims data at ASP+4 percent, consistent with the CY 2010 payment methodology for other separately payable nonpass-through drugs and biologicals. We also finalized a policy to extend the CY 2009 payment methodology to new therapeutic radiopharmaceutical HCPCS codes, consistent with our final policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60581 through 60526), providing separate payment for therapeutic radiopharmaceuticals that do not crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and are without OPPS hospital claims data at ASP+4 percent. This policy was continued in CYs 2011, 2012, and 2013, paying for new drugs, biologicals, and radiopharmaceuticals that do not have pass-through status, and are without OPPS hospital claims data at ASP+5 percent, ASP+4 percent, and ASP+6 percent, respectively, consistent with the final OPPS payment methodology for other separately payable drugs and biological during those payment years.

For CY 2014, we are proposing to provide payment for new drugs, biologicals, and therapeutic radiopharmaceuticals that do not have pass-through status at ASP+6 percent, consistent with the proposed CY 2014 payment methodology for other separately payable nonpass-through drugs, biologicals, and therapeutic radiopharmaceuticals to pay at ASP+6 percent based on the statutory default. We believe this proposed policy would ensure that new nonpass-through drugs, biologicals and therapeutic radiopharmaceuticals would be treated like other drugs, biologicals, and therapeutic radiopharmaceuticals under the OPPS.

For CY 2014, we also are proposing to package payment for all new nonpass-through diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies or devices when used in a surgical procedure, with HCPCS codes but without claims data (those new CY 2014 HCPCS codes that do not crosswalk to predecessor HCPCS codes). This is consistent with the proposed policy packaging all existing nonpass-through diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies or devices when used in a surgical procedure, as discussed in more detail in section II.A.3. of this proposed rule.

In accordance with the OPPS ASP methodology, in the absence of ASP data, for CY 2014, we are proposing to continue the policy we implemented beginning in CY 2005 of using the WAC for the product to establish the initial payment rate for new nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS claims data and are not diagnostic radiopharmaceuticals and contrast agents. However, we noted that if the WAC is also unavailable, we would make payment at 95 percent of the product's most recent AWP. We also are proposing to assign status indicator “K” (for separately paid nonpass-through drugs and biologicals, including therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and biologicals without OPPS claims data and for which we have not granted pass-through status. With respect to new, nonpass-through drugs, biologicals, and therapeutic radiopharmaceuticals for which we do not have ASP data, we are proposing that once their ASP data become available in later quarterly submissions, their payment rates under the OPPS would be adjusted so that the rates would be based on the ASP methodology and set to the finalized ASP-based amount (proposed for CY 2014 at ASP+6 percent) for items that have not been granted pass-through status. This proposed policy, which utilizes the ASP methodology that requires us to use WAC data when ASP data are unavailable and 95 percent of AWP when WAC and ASP data are unavailable, for new nonpass-through drugs and biologicals with an ASP, is consistent with prior years' policies for these items, and would ensure that new nonpass-through drugs, biologicals, and therapeutic radiopharmaceuticals would be treated like other drugs, biologicals, and therapeutic radiopharmaceuticals under the OPPS, unless they are granted pass-through status.

Similarly, we are proposing to continue to base the initial payment for new therapeutic radiopharmaceuticals with HCPCS codes, but which do not have pass-through status and are without claims data, on the WACs for these products if ASP data for these therapeutic radiopharmaceuticals are not available. If the WACs are also unavailable, we are proposing to make payment for new therapeutic radiopharmaceuticals at 95 percent of the products' most recent AWP because we would not have mean costs from hospital claims data upon which to base payment. As we are proposing with new drugs and biologicals, we are proposing to continue our policy of assigning status indicator “K” to HCPCS codes for new therapeutic radiopharmaceuticals without OPPS claims data for which we have not granted pass-through status.

Consistent with other ASP-based payment, for CY 2014 we are proposing to announce any changes to the payment amounts for new drugs and biologicals in the CY 2014 OPPS/ASC final rule with comment period and also on a quarterly basis on the CMS Web site during CY 2014 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that changes to the payment rates for these drugs and biologicals are necessary. The payment rates for new therapeutic radiopharmaceuticals also would be changed accordingly based on later quarter ASP submissions. We note that the new CY 2014 HCPCS codes for drugs, biologicals and therapeutic radiopharmaceuticals are not available at the time of development of this proposed rule. However, these agents will be included in Addendum B to the CY 2014 OPPS/ASC final rule with comment period (which will be available via the Internet on the CMS Web site), where they will be assigned comment indicator “NI.” This comment indicator reflects that their interim final OPPS treatment is open to public comment in the CY 2014 OPPS/ASC final rule with comment period.

There are several nonpass-through drugs and biologicals that were payable in CY 2012 and/or CY 2013 for which we did not have CY 2012 hospital claims data available for this proposed rule and for which there are no other HCPCS codes that describe different doses of the same drug, but which have pricing information available for the ASP methodology. We note that there are currently no therapeutic radiopharmaceuticals in this category. In order to determine the packaging status of these products for CY 2014, we calculated an estimate of the per day cost of each of these items by multiplying the payment rate of each product based on ASP+6 percent, similar to other nonpass-through drugs and biologicals paid separately under the OPPS, by an estimated average number of units of each product that would typically be furnished to a patient during one day in the hospital outpatient setting. This rationale was first adopted in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68666 and 68667).

We are proposing to package items for which we estimated the per day administration cost to be less than or equal to $90, which is the general Start Printed Page 43611packaging threshold that we are proposing for drugs, biologicals, and therapeutic radiopharmaceuticals in CY 2014. We are proposing to pay separately for items with an estimated per day cost greater than $90 (with the exception of diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies or devices when used in a surgical procedure, which we are proposing to package regardless of cost, as discussed in more detail in section II.A.3. of this proposed rule) in CY 2014. We are proposing that the CY 2014 payment for separately payable items without CY 2012 claims data would be ASP+6 percent, similar to payment for other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the ASP methodology paid in the physician's office setting, in the absence of ASP data, we are proposing to use the WAC for the product to establish the initial payment rate. However, we note that if the WAC is also unavailable, we would make payment at 95 percent of the most recent AWP available.

The proposed estimated units per day and status indicators for these items are displayed in Table 26 below.

Table 26—Drugs and Biologicals Without CY 2012 Claims Data

CY 2014 HCPCS code

CY 2014 Long descriptor

Estimated average number of units per day

Proposed CY 2014 SI

Proposed CY 2014 APC

90581

Anthrax vaccine, for subcutaneous or intramuscular use

1

K

1422

J0205

Injection, alglucerase, per 10 units

420

K

0900

J0215

Injection, alefacept, 0. 5 mg

29

K

1633

J0220

Injection, alglucosidase alfa, 10 mg, not otherwise specified

150

K

9234

J0364

Injection, apomorphine hydrochloride, 1 mg

1

N

N/A

J0395

Injection, arbutamine hcl, 1 mg

20

K

1432

J0725

Injection, chorionic gonadotropin, per 1,000 usp units

1

N

N/A

J1324

Injection, enfuvirtide, 1 mg

216

K

1361

J1435

Injection, estrone, per 1 mg

150

K

1435

J1620

Injection, gonadorelin hydrochloride, per 100 mcg

11

N

N/A

J1730

Injection, diazoxide, up to 300 mg

1

N

N/A

J1835

Injection, itraconazole, 50 mg

80

N

N/A

J2724

Injection, protein c concentrate, intravenous, human, 10 iu

1540

K

1139

J2725

Injection, protirelin, per 250 mcg

4

K

1357

J3355

Injection, urofollitropin, 75 iu

2

K

1741

J7196

Injection, antithrombin recombinant, 50 i. U.

268

K

1332

J7513

Daclizumab, parenteral, 25 mg

2

K

1612

J8562

Fludarabine phosphate, oral, 10 mg

1

N

N/A

J8650

Nabilone, oral, 1 mg

4

K

1424

J9216

Injection, interferon, gamma 1-b, 3 million units

1

K

0838

J9226

Histrelin implant (supprelin la), 50 mg

1

K

1142

J9300

Injection, gemtuzumab ozogamicin, 5 mg

1

K

9004

Q0515

Injection, sermorelin acetate, 1 microgram

70

K

3050

Finally, there were 11 drugs and biologicals, shown in Table 27, that were payable in CY 2012 but for which we lacked CY 2012 claims data and any other pricing information for the ASP methodology for this CY 2014 OPPS/ASC proposed rule. In CY 2009, for similar items without CY 2007 claims data and without pricing information for the ASP methodology, we stated that we were unable to determine their per day cost and we packaged these items for the year, assigning these items status indicator “N.”

For CY 2010, we finalized a policy to change the status indicator for drugs and biologicals previously assigned a payable status indicator to status indicator “E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill type)) whenever we lacked claims data and pricing information and were unable to determine the per day cost. In addition, we noted that we would provide separate payment for these drugs and biologicals if pricing information reflecting recent sales became available mid-year in CY 2010 for the ASP methodology. If pricing information became available, we would assign the products status indicator “K” and pay for them separately for the remainder of CY 2010. We continued this policy for CYs 2011, 2012, and 2013 (75 FR 71973, 76 FR 74334, and 77 FR 68396, respectively).

For CY 2014, we are proposing to continue to assign status indicator “E” to drugs and biologicals that lack CY 2012 claims data and pricing information for the ASP methodology. All drugs and biologicals without CY 2012 hospital claims data and data based on the ASP methodology that are assigned status indicator “E” on this basis at the time of this proposed rule for CY 2014 are displayed in Table 27 below. If pricing information becomes available, we are proposing to assign the products status indicator “K” and pay for them separately for the remainder of CY 2014.Start Printed Page 43612

Table 27—Drugs and Biologicals Without CY 2012 Claims Data and Without Pricing Information for the ASP Methodology

C. Nuclear Medicine Procedure-to-Radiolabeled Product Edits

Beginning January 1, 2008, CMS implemented OPPS edits that require hospitals to include a HCPCS code for a radiolabeled product when a separately payable nuclear medicine procedure is present on a claim. For CY 2014, we are proposing to no longer require the nuclear medicine procedure-to-radiolabeled product edits. Under this proposal, hospitals would still be expected to adhere to the guidelines of correct coding and append the correct radiolabeled product code to the claim when applicable. However, claims would no longer be returned to providers when HCPCS codes for radiolabeled products do not appear on claims with nuclear medicine procedures. We believe that this is appropriate because hospitals have now had several years of experience reporting procedures involving radiolabeled products and have grown accustomed to ensuring that they code and report charges so that their claims fully and appropriately reflect the costs of those radiolabeled products. Therefore, we do not believe that the burden on hospitals of adhering to the nuclear medicine procedure-to-radiolabeled product edits continues to be warranted. As with all other items and services recognized under the OPPS, we expect hospitals to code and report their costs appropriately, regardless of whether there are claims processing edits in place.

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable percentage,” currently not to exceed 2.0 percent of total program payments estimated to be made for all covered services under the OPPS furnished for that year. If we estimate before the beginning of the calendar year that the total amount of pass-through payments in that year would exceed the applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction in the amount of each of the transitional pass-through payments made in that year to ensure that the limit is not exceeded. We estimate the pass-through spending to determine whether payments exceed the applicable percentage and the appropriate prorata reduction to the conversion factor for the projected level of pass-through spending in the following year to ensure that total estimated pass-through spending for the prospective payment year is budget neutral, as required by section 1833(t)(6)(E) of the Act.

For devices, developing an estimate of pass-through spending in CY 2014 entails estimating spending for two groups of items. The first group of items consists of device categories that were recently made eligible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2014. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass-through spending estimate for known device categories continuing into the applicable update year. The second group of items consists of items that we know are newly eligible, or project may be newly eligible, for device pass-through payment in the remaining quarters of CY 2013 or beginning in CY 2014. The sum of the CY 2014 pass-through estimates for these two groups of device categories would equal the total CY 2014 pass-through spending estimate for device categories with pass-through status. We base the device pass-through estimated payments for each device category on the amount of payment as established in section 1833(t)(6)(D)(ii) of the Act, and as outlined in previous rules, including the CY 2013 OPPS/ASC final rule with comment period (77 FR 68397). We note that, beginning in CY 2010, the pass-through evaluation process and pass-through payment for implantable biologicals newly approved for pass-through payment beginning on or after January 1, 2010, that are surgically inserted or implanted (through a surgical incision or a natural orifice) is the device pass-through process and payment methodology (74 FR 60476). As has been our past practice (76 FR 74335), we include an estimate of any implantable biologicals eligible for pass-through payment in our estimate of pass-through spending for devices.

For drugs and biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (or, if the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary determines is associated with the drug or biological. We note that the Part B drug CAP program has been postponed since CY 2009, and such a program has Start Printed Page 43613not been proposed to be reinstated for CY 2014. Because we are proposing to pay for most nonpass-through separately payable drugs and biologicals under the CY 2014 OPPS at ASP+6 percent, as we discussed in section V.B.3. of this proposed rule, which represents the otherwise applicable fee schedule amount associated with most pass-through drugs and biologicals, and because we are proposing to pay for CY 2014 pass-through drugs and biologicals at ASP+6 percent, as we discussed in section V.A. of this proposed rule, our estimate of drug and biological pass-through payment for CY 2014 for this group of items is $0, as discussed below.

Payment for certain drugs, specifically diagnostic radiopharmaceuticals and contrast agents, without pass-through status will always be packaged into payment for the associated procedures and these products would not be separately paid. In addition, we are proposing to policy-package all nonpass-through drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure and drugs and biologicals that function as supplies or devices when used in a surgical procedure for CY 2014, as discussed in section II.A.3. of this proposed rule. All of these policy-packaged drugs and biologicals with pass-through status would be paid at ASP+6 percent like other pass-through drugs and biologicals for CY 2014. Therefore, our estimate of pass-through payment for policy-packaged drugs and biologicals with pass-through status approved prior to CY 2014 is not $0. In section V.A.4. of this proposed rule, we discuss our proposed policy to determine if the costs of certain policy-packaged drugs or biologicals are already packaged into the existing APC structure. If we determine that a policy-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologicals already included in the costs of the APCs that are associated with the drug receiving pass-through payment, we are proposing to offset the amount of pass-through payment for the policy-packaged drug or biological. For these drugs or biologicals, the APC offset amount is the portion of the APC payment for the specific procedure performed with the pass-through drug or biological which we refer to as the policy-packaged drug APC offset amount. If we determine that an offset is appropriate for a specific policy-packaged drug or biological receiving pass-through payment, we are proposing to reduce our estimate of pass-through payments for these drugs or biologicals by this amount.

Similar to pass-through estimates for devices, the first group of drugs and biologicals requiring a pass-through payment estimate consists of those products that were recently made eligible for pass-through payment and that would continue to be eligible for pass-through payment in CY 2014. The second group contains drugs and biologicals that we know are newly eligible, or project will be newly eligible, in the remaining quarters of CY 2013 or beginning in CY 2014. The sum of the proposed CY 2014 pass-through estimates for these two groups of drugs and biologicals equals the proposed total CY 2014 pass-through spending estimate for drugs and biologicals with pass-through status.

B. Proposed Estimate of Pass-Through Spending

We are proposing to set the applicable pass-through payment percentage limit at 2.0 percent of the total projected OPPS payments for CY 2014, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, and our OPPS policy from CY 2004 through CY 2013 (77 FR 68398).

For the first group of devices for pass-through payment estimation purposes, there currently are no device categories receiving pass-through payment in CY 2013 that would continue to be eligible for pass-through payment for CY 2014. As discussed in section IV.A. of this proposed rule, we finalized in the CY 2013 OPPS/ASC final rule with comment period the expiration of pass-through payment for three device categories after the end of CY 2013. Therefore, we estimate that CY 2014 pass-through expenditures for the first group of pass-through device categories to be $0. In estimating our CY 2014 pass-through spending for device categories in the second group, we include: Device categories that we knew at the time of the development of the proposed rule will be newly eligible for pass-through payment in CY 2014 (of which there are none); additional device categories that we estimate could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2014; and contingent projections for new device categories established in the second through fourth quarters of CY 2014. We are proposing to use the general methodology described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking into account recent OPPS experience in approving new pass-through device categories. For this proposed rule, the estimate of CY 2014 pass-through spending for this second group of device categories is $10 million. Using our established methodology, we are proposing that the total estimated pass-through spending for device categories for CY 2014 (spending for the first group of device categories ($0) plus spending for the second group of device categories ($10 million)) would be $10 million.

To estimate CY 2014 pass-through spending for drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing on pass-through status for CY 2014, we are proposing to utilize the most recent Medicare physician's office data regarding their utilization, information provided in the respective pass-through applications, historical hospital claims data, pharmaceutical industry information, and clinical information regarding those drugs or biologicals to project the CY 2014 OPPS utilization of the products.

For the known drugs and biologicals (excluding policy-packaged diagnostic radiopharmaceuticals. contrast agents, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies or devices when used in a surgical procedure) that will be continuing on pass-through status in CY 2014, we estimate the pass-through payment amount as the difference between ASP+6 percent and the payment rate for nonpass-through drugs and biologicals that will be separately paid at ASP+6 percent, which is zero for this group of drugs. Because payment for policy-packaged drugs and biologicals is proposed to be packaged if the product was not paid separately due to its pass-through status, we are proposing to include in the CY 2014 pass-through estimate the difference between payment for the policy-packaged drug or biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the policy-packaged drug APC offset amount, if we determined that the policy-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologicals already included in the costs of the APCs that are associated with the drug receiving pass-through payment. For this proposed rule, using the proposed methodology described above, we calculated a CY 2014 proposed spending estimate for this first group of drugs and biologicals of approximately $0.962 million.

To estimate proposed CY 2014 pass-through spending for drugs and biologicals in the second group (that is, Start Printed Page 43614drugs and biologicals that we knew at the time of development of the proposed rule are newly eligible for pass-through payment in CY 2014, additional drugs and biologicals that we estimate could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2014, and projections for new drugs and biologicals that could be initially eligible for pass-through payment in the second through fourth quarters of CY 2014), we are proposing to use utilization estimates from pass-through applicants, pharmaceutical industry data, clinical information, recent trends in the per unit ASPs of hospital outpatient drugs, and projected annual changes in service volume and intensity as our basis for making the CY 2014 pass-through payment estimate. We also are proposing to consider the most recent OPPS experience in approving new pass-through drugs and biologicals. Using our proposed methodology for estimating CY 2014 pass-through payments for this second group of drugs, we calculated a proposed spending estimate for this second group of drugs and biologicals of approximately $0.165 million.

As discussed in section V.A. of this proposed rule, radiopharmaceuticals are considered drugs for pass-through purposes. Therefore, we include radiopharmaceuticals in our proposed CY 2014 pass-through spending estimate for drugs and biologicals. Our proposed CY 2014 estimate for total pass-through spending for drugs and biologicals (spending for the first group of drugs and biologicals ($0.962 million) plus spending for the second group of drugs and biologicals ($0.165 million)) equals $1.127 million.

In summary, in accordance with the methodology described above in this section, for this proposed rule, we estimate that total pass-through spending for the device categories and the drugs and biologicals that are continuing to receive pass-through payment in CY 2014 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2014 would be approximately $11 million (approximately $10 million for device categories and approximately $1 million for drugs and biologicals), which represents 0.02 percent of total projected OPPS payments for CY 2014. We estimate that pass-through spending in CY 2014 would not amount to 2.0 percent of total projected OPPS CY 2014 program spending.

VII. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

Currently, hospitals report HCPCS visit codes to describe three types of OPPS services: clinic visits, emergency department (ED) visits, and critical care services, including trauma team activation. Historically, we have recognized the CPT and HCPCS codes describing clinic visits, Type A and Type B (ED) visits, and critical care services, which are listed below in Table 28. We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74338 through 74346) for a full discussion of our policy on OPPS payment for hospital outpatient visits for CY 2013 and prior years.

Since April 7, 2000, we have instructed hospitals to report facility resources for clinic and ED hospital outpatient visits using the CPT E/M codes and to develop internal hospital guidelines for reporting the appropriate visit level (65 FR 18451). Because a national set of hospital-specific codes and guidelines do not currently exist, we have advised hospitals that each hospital's internal guidelines that determine the levels of clinic and ED visits to be reported should follow the intent of the CPT code descriptors, in that the guidelines should be designed to reasonably relate the intensity of hospital resources to the different levels of effort represented by the codes.

While many hospitals have advocated for hospital-specific national guidelines for visit billing since the OPPS started in 2000, and we have signaled through rulemaking our intent to develop guidelines, this complex undertaking has proven challenging. Our work with interested stakeholders, such as hospital associations, along with a contractor, has confirmed that no single approach could consistently and accurately capture hospitals' relative costs. Public comments received on this issue, as well as our own knowledge of how clinics operate, have led us to conclude that it is not feasible to adopt a set of national guidelines for reporting hospital clinic visits that can accommodate the enormous variety of patient populations and service-mix provided by hospitals of all types and sizes throughout the country. Moreover, no single approach appears to be broadly endorsed by the stakeholder community.

For CY 2014, we are proposing to modify our longstanding policies related to hospital outpatient clinic and ED visits. Rather than recognizing five levels of clinic and ED visits respectively, we are proposing to create three new alphanumeric Level II HCPCS codes to describe all levels of each type of clinic and ED visit, as discussed in greater detail below. We believe a policy that recognizes a single visit level for clinic visits, Type A ED visits, and Type B ED visits for payment under the OPPS is appropriate for several reasons. First, the proposal is in line with our strategic goal of using larger payment bundles to maximize hospitals' incentives to provide care in the most efficient matter as stated in section II.A.3. of this proposed rule. We believe this proposal will remove any incentives hospitals may have to provide medically unnecessary services or expend additional, unnecessary resources to achieve a higher level of visit payment under the OPPS. Second, we believe that it is important to consider ways in which we can reduce the administrative burden that Medicare payment policies place on hospitals, while maintaining our ability to calculate accurate payment rates under the OPPS. We believe that replacing the 20 HCPCS codes currently recognized for clinic visits and ED visits with three new alphanumeric Level II HCPCS codes would reduce administrative burden and would be easily adopted by hospitals, because the three new codes would require hospitals to distinguish only among clinic visits, Type A ED visits, and Type B ED visits. Discontinuing the use of the five levels of HCPCS visit codes for clinic and Type A and Type B ED visits would reduce hospitals' administrative burden by eliminating the need for them to develop and apply their own internal guidelines to differentiate among five levels of resource use for every clinic visit and ED visit they provide, and by eliminating the need to distinguish between new and established patients. Third, our proposal allows a large universe of claims to be utilized for ratesetting for each of the three newly proposed alphanumeric Level II HCPCS visit codes. We believe this large volume of claims available for ratesetting for each of the newly proposed alphanumeric Level II HCPCS visit codes will allow us to capture a very broad spectrum of cases ranging from extremely low complexity cases to extremely high complexity cases. We believe this large and diverse spectrum of clinical complexity and resource variation within the claims as well as the very high volume of claims that we propose to use for ratesetting for the newly proposed alphanumeric Level II HCPCS visit new codes will allow us to have very accurate data upon which to develop accurate and appropriate payments. Lastly, we also believe that removing the differentiation among five levels of intensity for each visit will eliminate any incentive for hospitals to “upcode” patients whose visits do not fall clearly into one category or another.

For these reasons, for CY 2014, we are proposing to discontinue our longstanding policy of recognizing five distinct visit levels for clinic visits and ED visits based on the existing HCPCS E/M codes, and instead recognize three new alphanumeric HCPCS codes for each visit type. Specifically, we are proposing to create a new alphanumeric HCPCS code (GXXXC) for hospital use only representing any clinic visit under the OPPS and to assign the newly created alphanumeric clinic visit HCPCS code (GXXXC) to its own newly created APC 0634. Using CY 2012 claims data, we are proposing to develop CY 2014 OPPS payment rates for the new HCPCS code GXXXC based on the total mean cost of the levels one through five CPT E/M codes for clinic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). While we would use data for CPT codes 99201 through 99205 and 99211 through 99215 from claims billed in CY 2012 to calculate the mean cost for new APC 0634, we would no longer recognize those CPT codes when they appear on hospital claims effective January 1, 2014. We also are proposing to no longer recognize a distinction between new and established patient clinic visits. Under this proposal, all clinic visits would be reported using new HCPCS code GXXXC, regardless of whether or not the patient has been registered as an inpatient or outpatient of the hospital within the 3 years prior to a visit.

In addition, we are proposing to discontinue our longstanding policy of recognizing five distinct visit levels for Type A ED visits and instead are proposing to create a new alphanumeric HCPCS code (GXXXA) for hospital use only representing any Type A ED visit under the OPPS. We are proposing to assign the newly created alphanumeric Type A ED visit HCPCS code (GXXXA) to its own newly created APC 0635. Using CY 2012 claims data, we are proposing to develop CY 2014 OPPS payment rates for new HCPCS code GXXXA based on the total mean cost of the levels 1 through 5 CPT E/M codes for Type A ED visits currently recognized under the OPPS (CPT codes 99281 through 99285). While we would use data for CPT codes 99281 through 99285 from claims billed in CY 2012 to calculate the mean cost for new APC 0635, we would no longer recognize those CPT codes when they appear on hospital claims effective January 1, 2014. Similarly, we also are proposing to discontinue our longstanding policy of recognizing five distinct visit levels for Type B ED visits and instead are proposing to create a new alphanumeric HCPCS code (GXXXB) representing all Type B ED visits under the OPPS. We are proposing to assign the newly created alphanumeric Type B ED visit HCPCS code (GXXXB) to its own newly created APC 0636. Using CY 2012 claims data, we are proposing to develop CY 2014 OPPS payment rates Start Printed Page 43616for new HCPCS code GXXXB based on the total mean cost of the levels 1 through 5 HCPCS codes for Type B ED visits currently recognized under the OPPS (HCPCS codes G0380 through G0384). While we would use data for HCPCS codes G0380 through G0384 from claims billed in CY 2012 to calculate the mean cost for new APC 0636, we would no longer recognize those HCPCS codes for Type B ED visits when they appear on hospital claims effective January 1, 2014.

We note that we would use the hospital claims data for new HCPCS codes GXXXA, GXXXB, and GXXXC when available for future ratesetting. The proposed changes to the visit coding and payment structure are summarized below in Table 29. We welcome public comments on our CY 2014 proposal to recognize a single visit level for clinic, Type A ED, and Type B ED visits for payment under the OPPS. We believe this proposal will allow us to make accurate payments for visits broad-scale because we will be using data from the universe of hospital outpatient visits, for which we have an extremely high volume of claims representing the entire spectrum of costs incurred by hospitals. Nonetheless, we are interested in hearing from stakeholders regarding whether a different approach may be preferable to capture the resource utilization for extremely low complexity cases as well as extremely high complexity cases or to otherwise recognize a difference among visit levels. While we do not believe, based on our current assessment, that it is necessary to provide additional payment levels or carve out these cases to make accurate and appropriate payments for visits, we are interested in hearing from hospitals whether there are certain cases that would not be best accommodated by a single level of payment. If such cases exist, we welcome stakeholder input into whether and how this proposal could be changed in the final rule to either make exceptions for or accommodate these special cases. If commenters provide compelling comments describing such special cases or the need for additional payment levels, should they exist, and if there are alternative policies that would more accurately and appropriately pay for visits, we would consider implementing a different policy in the final rule. We note that, to the extent that commenters recommend that additional levels of payment or special high complexity or low complexity cases be recognized, we also would be interested in how we should define and differentiate those levels or cases.

C. Proposed Payment for Critical Care Services

We are proposing to continue the methodology established in the CY 2011 OPPS/ASC final rule with comment period for calculating a payment rate for critical care services that includes packaged payment of ancillary services. For CY 2010 and in prior years, the AMA CPT Editorial Panel defined critical care CPT codes 99291 (Critical care, evaluation and management of the critically ill or critically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 minutes (List separately in addition to code for primary service)) to include a wide range of ancillary services such as electrocardiograms, chest X-rays, and pulse oximetry. As we have stated in manual instruction, we expect hospitals to report in accordance with CPT guidance unless we instruct otherwise. For critical care in particular, we instructed hospitals that any services that the CPT Editorial Panel indicates are included in the reporting of CPT code 99291 (including those services that would otherwise be reported by and paid to hospitals using any of the CPT codes specified by the CPT Editorial Panel) should not be billed separately. Instead, hospitals were instructed to report charges for any services provided as part of the critical care services. In establishing payment rates for critical care services and other services, CMS packages the costs of certain items and services separately reported by HCPCS codes into payment for critical care services and other services, according to the standard OPPS methodology for packaging costs (Medicare Claims Processing Manual, Pub. 100-04, Chapter 4, Section 160.1).

For CY 2011, the AMA CPT Editorial Panel revised its guidance for the critical care codes to specifically state Start Printed Page 43617that, for hospital reporting purposes, critical care codes do not include the specified ancillary services. Beginning in CY 2011, hospitals that report in accordance with the CPT guidelines should report all of the ancillary services and their associated charges separately when they are provided in conjunction with critical care. Because the CY 2011 payment rate for critical care services was based on hospital claims data from CY 2009, during which time hospitals would have reported charges for any ancillary services provided as part of the critical care services, we stated in the CY 2011 OPPS/ASC final rule with comment period that we believed it was inappropriate to pay separately in CY 2011 for the ancillary services that hospitals may now report in addition to critical care services (75 FR 71988). Therefore, for CY 2011, we continued to recognize the existing CPT codes for critical care services and established a payment rate based on historical data, into which the cost of the ancillary services was intrinsically packaged. We also implemented claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment. We noted in the CY 2011 OPPS/ASC final rule with comment period that the payment status of the ancillary services would not change when they are not provided in conjunction with critical care services. We assigned status indicator “Q3” (Codes That May Be Paid Through a Composite APC) to the ancillary services to indicate that payment for these services is packaged into a single payment for specific combinations of services and made through a separate APC payment or packaged in all other circumstances, in accordance with the OPPS payment status indicated for status indicator “Q3” in Addendum D1 to the CY 2011 OPPS/ASC final rule with comment period. The ancillary services that were included in the definition of critical care prior to CY 2011 and that are conditionally packaged into the payment for critical care services when provided on the same date of service as critical care services for CY 2011 were listed in Addendum M to that final rule with comment period.

Because the CY 2012 costs for critical care services were based upon CY 2010 claims data, which reflected the CPT billing guidance that was in effect prior to CY 2011, in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74343 through 74344), we continued the methodology established in the CY 2011 OPPS/ASC final rule with comment period of calculating a payment rate for critical care services based on our historical claims data, into which the cost of the ancillary services is intrinsically packaged for CY 2012. We also continued to implement claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment.

As we discussed in the CY 2013 OPPS/ASC final rule with comment period, the CY 2011 hospital claims data on which the CY 2013 payment rates are based reflect the first year of claims billed under the revised CPT guidance to allow the reporting of all the ancillary services and their associated charges separately when they are provided in conjunction with critical care (77 FR 68402). Because our policy to establish relative payment weights based on geometric mean cost data for CY 2013 represented a change from our historical practice to base payment rates on median costs, and because we now have hospital claims data for the first time reflecting the revised coding guidance for critical care, we reviewed the CY 2011 hospital claims data available for the CY 2013 OPPS/ASC final rule with comment period and determined that the data showed increases in both the mean and median line item costs as well as the mean and median line item charges for CPT code 99291, when compared to CY 2010 hospital claims data. Specifically, we noted that the mean and median line item costs increased 13 percent and 16 percent, respectively, and the mean and median line item charges increased 11 percent and 14 percent, respectively. Additionally, when compared to CY 2010 hospital claims data, CY 2011 hospital claims data showed no substantial change in the ancillary services that were presented on the same claims as critical care services, and also showed continued low volumes of many ancillary services. We stated in the CY 2013 OPPS/ASC final rule with comment period that, had the majority of hospitals changed their billing practices to separately report and charge for the ancillary services formerly included in the definition of critical care CPT codes 99291 and 99292, we would have expected to see a decrease in the costs and charges for these CPT codes, and a significant increase in ancillary services reported on the same claims. We indicated that the lack of a substantial change in the services reported on critical care claims, along with the increases in the line item costs and charges for critical care services, strongly suggested that many hospitals did not change their billing practices for CPT code 99291 following the revision to the CPT coding guidance effective January 1, 2011.

In light of not having claims data to support a significant change in hospital billing practices, we stated in the CY 2013 OPPS/ASC final rule with comment period that we continued to believe that it is inappropriate to pay separately in CY 2013 for the ancillary services that hospitals may now report in addition to critical care services. Therefore, for CY 2013, we continued our CY 2011 and CY 2012 policy to recognize the existing CPT codes for critical care services and establish a payment rate based on historical claims data. We also continued to implement claims processing edits that conditionally packaged payment for the ancillary services that were reported on the same date of service as critical care services in order to avoid overpayment. We stated that we would continue to monitor the hospital claims data for CPT code 99291 in order to determine whether revisions to this policy are warranted based on changes in hospitals' billing practices.

When compared to CY 2011 hospital claims data used for the CY 2013 OPPS ratesetting, CY 2012 hospital claims data used for the CY 2014 OPPS ratesetting show increases in the mean line- item costs as well as the mean line-item charges for CPT code 99291, which continue to suggest that hospitals did not change their billing practices for CPT code 99291 following the revision to the CPT coding guidance effective January 1, 2011. In light of not having claims data to support a significant change in hospital billing practices, we continue to believe that it is inappropriate to pay separately in CY 2014 for the ancillary services that hospitals may now report in addition to critical care services. Therefore, for CY 2014, we are proposing to continue our CY 2011, CY 2012, and CY 2013 policy to recognize the existing CPT codes for critical care services and establish a payment rate based on historical claims data. We also are proposing to continue to implement claims processing edits that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment. We will continue to monitor the hospital claims data for CPT code 99291 in order to determine whether revisions to this policy are warranted based on changes in hospitals' billing practices.Start Printed Page 43618

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

Partial hospitalization is an intensive outpatient program of psychiatric services provided to patients as an alternative to inpatient psychiatric care for individuals who have an acute mental illness. Section 1861(ff)(1) of the Act defines partial hospitalization services as “the items and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursuant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such program), which sets forth the physician's diagnosis, the type, amount, frequency, and duration of the items and services provided under the plan, and the goals for treatment under the plan.” Section 1861(ff)(2) of the Act describes the items and services included in partial hospitalization services. Section 1861(ff)(3)(A) of the Act specifies that a partial hospitalization program (PHP) is a program furnished by a hospital to its outpatients or by a community mental health center (CMHC) (as defined in subparagraph (B)), and “which is a distinct and organized intensive ambulatory treatment service offering less than 24-hour-daily care other than in an individual's home or in an inpatient or residential setting.” Section 1861(ff)(3)(B) of the Act defines a community mental health center for purposes of this benefit.

Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the authority to designate the OPD services to be covered under the OPPS. The Medicare regulations that implement this provision specify, under 42 CFR 419.21, that payments under the OPPS will be made for partial hospitalization services furnished by CMHCs as well as Medicare Part B services furnished to hospital outpatients designated by the Secretary, which include partial hospitalization services (65 FR 18444 through 18445).

Section 1833(t)(2)(C) of the Act, in pertinent part, requires the Secretary to “establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on median (or, at the election of the Secretary, mean) hospital costs” using data on claims from 1996 and data from the most recent available cost reports. In pertinent part, subparagraph (B) provides that the Secretary may establish groups of covered OPD services, within a classification system developed by the Secretary for covered OPD services, so that services classified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we have developed the PHP APCs. Section 1833(t)(9)(A) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors.”

Because a day of care is the unit that defines the structure and scheduling of partial hospitalization services, we established a per diem payment methodology for the PHP APCs, effective for services furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under this methodology, the median per diem costs have been used to calculate the relative payment weights for PHP APCs.

From CY 2003 through CY 2006, the median per diem costs for CMHCs fluctuated significantly from year to year, while the median per diem costs for hospital-based PHPs remained relatively constant. We were concerned that CMHCs may have increased and decreased their charges in response to Medicare payment policies. Therefore, we began efforts to strengthen the PHP benefit through extensive data analysis and policy and payment changes finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). We made two refinements to the methodology for computing the PHP median: the first remapped 10 revenue codes that are common among hospital-based PHP claims to the most appropriate cost centers; and the second refined our methodology for computing the PHP median per diem cost by computing a separate per diem cost for each day rather than for each bill. We refer readers to a complete discussion of these refinements in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676).

In CY 2009, we implemented several regulatory, policy, and payment changes, including a two-tiered payment approach for PHP services under which we paid one amount for days with 3 services (APC 0172 Level I Partial Hospitalization) and a higher amount for days with 4 or more services (APC 0173 Level II Partial Hospitalization). We refer readers to section X.B. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693) for a full discussion of the two-tiered payment system. In addition, for CY 2009, we finalized our policy to deny payment for any PHP claims submitted for days when fewer than 3 units of therapeutic services are provided (73 FR 68694).

Furthermore, for CY 2009, we revised the regulations at 42 CFR 410.43 to codify existing basic PHP patient eligibility criteria and to add a reference to current physician certification requirements under 42 CFR 424.24 to conform our regulations to our longstanding policy (73 FR 68694 through 68695). These changes have helped to strengthen the PHP benefit. We also revised the partial hospitalization benefit to include several coding updates. We refer readers to section X.C.3. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68695 through 68697) for a full discussion of these requirements.

For CY 2010, we retained the two-tiered payment approach for PHP services and used only hospital-based PHP data in computing the APC per diem payment rates. We used only hospital-based PHP data because we were concerned about further reducing both PHP APC per diem payment rates without knowing the impact of the policy and payment changes we made in CY 2009. Because of the 2-year lag between data collection and rulemaking, the changes we made in CY 2009 were reflected for the first time in the claims data that we used to determine payment rates for the CY 2011 rulemaking (74 FR 60556 through 60559).

In CY 2011, in accordance with section 1301(b) of the Health Care and Education Reconciliation Act of 2010 (HCERA 2010), we amended the description of a PHP in our regulations to specify that a PHP must be a distinct and organized intensive ambulatory treatment program offering less than 24-hour daily care “other than in an individual's home or in an inpatient or residential setting.” In addition, in accordance with section 1301(a) of HCERA 2010, we revised the definition of a CMHC in the regulations to conform to the revised definition now set forth under section 1861(ff)(3)(B) of the Act. We discussed our finalized policies for these two provisions of HCERA 2010 in section X.C. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71990).

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we also established four separate PHP APC per diem payment rates, two for CMHCs (for Level I and Level II services) and two for hospital-based PHPs (for Level Start Printed Page 43619I and Level II services), based on each provider's own unique data. As stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46300) and the final rule with comment period (75 FR 71991), for CY 2011, using CY 2009 claims data, CMHC costs had significantly decreased again. We attributed the decrease to the lower cost structure of CMHCs compared to hospital-based PHP providers, and not the impact of the CY 2009 policies. CMHCs have a lower cost structure than hospital-based PHP providers, in part, because the data showed that CMHCs generally provide fewer PHP services in a day and use less costly staff than hospital-based PHPs. Therefore, it was inappropriate to continue to treat CMHCs and hospital-based providers in the same manner regarding payment, particularly in light of such disparate differences in costs. We also were concerned that paying hospital-based PHPs at a lower rate than their cost structure reflects could lead to hospital-based PHP closures and possible access problems for Medicare beneficiaries because hospital-based PHPs are located throughout the country and, therefore, offer the widest access to PHP services. In contrast, CMHC-based PHPs are largely concentrated in certain geographical areas with particular prevalence in Florida, Texas, and Louisiana. Creating the four payment rates (two for CMHCs and two for hospital-based PHPs) based on each provider's data supported continued access to the PHP benefit, while also providing appropriate payment based on the unique cost structures of CMHCs and hospital-based PHPs. In addition, separation of data by provider type was supported by several hospital-based PHP commenters who responded to the CY 2011 OPPS/ASC proposed rule (75 FR 71992).

For CY 2011, we instituted a 2-year transition period for CMHCs to the CMHC APC per diem payment rates based solely on CMHC data. For CY 2011, under the transition methodology, CMHC PHP APCs Level I and Level II per diem costs were calculated by taking 50 percent of the difference between the CY 2010 final hospital-based PHP median costs and the CY 2011 final CMHC median and then adding that number to the CY 2011 final CMHC median. A 2-year transition under this methodology moved us in the direction of our goal, which is to pay appropriately for PHP services based on each provider type's data, while at the same time allowing providers time to adjust their business operations and protect access to care for beneficiaries. We also stated that we would review and analyze the data during the CY 2012 rulemaking cycle and, based on these analyses, we might further refine the payment mechanism. We refer readers to section X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71991 through 71994) for a full discussion.

After publication of the CY 2011 OPPS/ASC final rule with comment period, a CMHC and one of its patients filed an application for a preliminary injunction, challenging the OPPS payment rates for PHP services provided by CMHCs in CY 2011 as adopted in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71995). We refer readers to the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius, No. 10-949, 2011 WL 3102049 (W.D.Tex. 2011), aff'd, No. 11-50682, 2012 WL 2161137 (5th Cir. June 15, 2012) (Paladin). The plaintiffs in the Paladin case challenged the agency's use of cost data derived from both hospitals and CMHCs in determining the relative payment weights for the OPPS payment rates for PHP services furnished by CMHCs, alleging that section 1833(t)(2)(C) of the Act requires that such relative payment weights be based on cost data derived solely from hospitals. As discussed above, section 1833(t)(2)(C) of the Act requires CMS to “establish relative payment weights for covered OPD services (and any groups of such services . . .) . . . based on . . . hospital costs.” Numerous courts have held that “based on” does not mean “based exclusively on.” On July 25, 2011, the District Court dismissed the plaintiffs' complaint and application for a preliminary injunction for lack of subject-matter jurisdiction, which the plaintiffs appealed to the United States Court of Appeals for the Fifth Circuit. On June 15, 2012, the Court of Appeals affirmed the District Court's dismissal for lack of subject-matter jurisdiction and found that the Secretary's payment rate determinations for PHP services are not a facial violation of a clear statutory mandate. (Paladin at *6).

For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74348 through 74352), we determined the relative payment weights for PHP services provided by CMHCs based on data derived solely from CMHCs and the relative payment weights for hospital-based PHP services based exclusively on hospital data. The statute is reasonably interpreted to allow the relative payment weights for the OPPS payment rates for PHP services provided by CMHCs to be based solely on CMHC data and relative payment weights for hospital-based PHP services to be based exclusively on hospital data. Section 1833(t)(2)(C) of the Act requires the Secretary to “establish relative payment weights for covered OPD services (and any groups of such services described in subparagraph (B)) based on . . . hospital costs.” In pertinent part, subparagraph (B) provides that “the Secretary may establish groups of covered OPD services . . . so that services classified within each group are comparable clinically and with respect to the use of resources.” In accordance with subparagraph (B), we developed the PHP APCs, as set forth in § 419.31 of the regulations (65 FR 18446 and 18447; 63 FR 47559 through 47562 and 47567 through 47569). As discussed above, PHP services are grouped into APCs.

Based on section 1833(t)(2)(C) of the Act, we believe that the word “establish” can be interpreted as applying to APCs at the inception of the OPPS in 2000 or whenever a new APC is added to the OPPS. In creating the original APC for PHP services (APC 0033), we did “establish” the initial relative payment weight for PHP services, provided in both hospital-based and CMHC-based settings, only on the basis of hospital data. Subsequently, from CY 2003 through CY 2008, the relative payment weights for PHP services were based on a combination of hospital and CMHC data. For CY 2009, we established new APCs for PHP services based exclusively on hospital data. Specifically, we adopted a two-tiered APC methodology (in lieu of the original APC 0033) under which CMS paid one rate for days with 3 services (APC 0172) and a different payment rate for days with 4 or more services (APC 0173). These two new APCs were established using only hospital data. For CY 2011, we added two new APCs (APCs 0175 and 0176) for PHP services provided by hospitals and based the relative payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were designated for PHP services provided by CMHCs and were based on a mixture of hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, the relative payment weights for the two APCs for PHP services provided by CMHCs in CY 2011 were “based on” hospital data, no less than the relative payment weights for the two APCs for hospital-based PHP services.

Although we used hospital data to establish the relative payment weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we believe that Start Printed Page 43620we have the authority to discontinue the use of hospital data in determining the OPPS relative payment weights for PHP services provided by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make plain that the data source for the relative payment weights is subject to change from one period to another. Section 1833(t)(2)(C) of the Act provides that, in establishing the relative payment weights, “the Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from the most recent available cost reports.” We used 1996 data (in addition to 1997 data) in determining only the original relative payment weights for 2000. In the ensuing calendar year updates, we continually used more recent cost report data.

Moreover, section 1833(t)(9)(A) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relative payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new cost data, and other relevant information and factors.” For purposes of the CY 2012 update, we exercised our authority under section 1833(t)(9)(A) of the Act to change the data source for the relative payment weights for PHP services provided by CMHCs based on “new cost data, and other relevant information and factors.”

In the CY 2013 OPPS/ASC final rule with comment period, we finalized our proposal to base the relative payment weights that underpin the OPPS APCs, including the four PHP APCs, on geometric means rather than on the medians. For CY 2013, we established the four PHP APC per diem payment rates based on geometric mean cost levels calculated using the most recent claims data for each provider type. We refer readers to the CY 2013 OPPS/ASC final rule with comment period for a more detailed discussion (77 FR 68406 through 68412).

B. Proposed PHP APC Update for CY 2014

For CY 2014, we are proposing to apply our established policies to calculate the four PHP APC per diem payment rates based on geometric mean per diem costs using the most recent claims data for each provider type. We computed proposed CMHC PHP APC geometric mean per diem costs for Level I (3 services per day) and Level II (4 or more services per day) PHP services using only CY 2012 CMHC claims data, and proposed hospital-based PHP APC geometric mean per diem costs for Level I and Level II PHP services using only CY 2012 hospital-based PHP claims data. These proposed geometric mean per diem costs are shown in Table 30 below.

For CY 2014, the proposed geometric mean per diem costs for days with 3 services (Level I) is approximately $94.51 for CMHCs and approximately $212.85 for hospital-based PHPs. The proposed geometric mean per diem costs for days with 4 or more services (Level II) is approximately $106.20 for CMHCs and approximately $215.13 for hospital-based PHPs. Therefore, the proposed geometric mean per diem costs for CMHCs continue to be substantially lower than the proposed geometric mean per diem costs for hospital-based PHPs for the same level of service provided, which indicates that there continues to be fundamental differences between the cost structures of CMHCs and hospital-based PHPs.

The CY 2014 proposed geometric mean per diem costs for CMHCs calculated under the proposed CY 2014 methodology using CY 2012 claims data have remained relatively constant when compared to the CY 2013 final geometric mean per diem costs for CMHCs established in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68412), with proposed geometric mean per diem costs for Level I PHP services increasing from approximately $87 to approximately $95 for CY 2014, and proposed geometric mean per diem costs for Level II PHP services decreasing from approximately $113 to approximately $106 for CY 2014.

The CY 2014 proposed geometric mean per diem costs for hospital-based PHPs calculated under the proposed CY 2014 methodology using CY 2012 claims data show more variation when compared to the CY 2013 final geometric mean per diem costs for hospital-based PHPs, with proposed geometric mean per diem costs for Level I PHP services increasing from approximately $186 to approximately $213 for CY 2014, and proposed geometric mean per diem costs for Level II PHP services decreasing from approximately $235 to approximately $215 for CY 2014.

In summary, the proposed CY 2014 geometric mean per diem costs for the PHP APCs are shown in Tables 31 and 32 below. We are inviting public comments on these proposals.

C. Discussion of Possible Future Initiatives and Request for Public Comments

We are considering a number of possible future initiatives that may help to ensure the long-term stability of PHPs and further improve the accuracy of payment for PHP services. Along with our broad, ongoing objectives of ensuring stability of the PHP benefit and promoting payment accuracy for PHPs, we want to ensure that PHPs are used by individuals who are specifically in need of such services. The PHP benefit was designed to assist individuals with an acute exacerbation of a psychiatric illness to manage debilitating symptoms and prevent the need for admission and readmission into hospitals. Accordingly, we are considering a number of possible future modifications to certain aspects of the PHP benefit. We are not proposing new Medicare policy in this discussion of possible future modifications. Instead, we are requesting public comments on possible future initiatives.

Under the current methodology, we use the most recent claims data to compute geometric mean per diem costs for Level I (3 services per day) and Level II (4 or more services per day) PHP services for CMHCs and for hospital-based PHPs. We are interested in examining the payment structure for PHP services to determine alternative methodologies to pay for PHP services that would reduce unnecessary care while maintaining or increasing the quality of care. We are inviting public comments on alternative payment methodologies.

One of the areas on which we would like to receive public comments is whether payment based on an episode of care, or a per diem similar to the inpatient psychiatric facility (IPF) PPS, would result in more appropriate payment for PHP services than the current payment structure. The IPF PPS is a per diem prospective payment system for inpatient psychiatric hospital services furnished in psychiatric hospitals, and psychiatric units in acute care hospitals and critical access hospitals. The IPF PPS base rate is adjusted to account for patient and facility characteristics that contribute to higher costs per day, including age, diagnosis-related group assignment, comorbidities, days of the stay, geographic wage area, rural location, teaching status, cost of living for IPFs located in Alaska and Hawaii, and the presence of a qualifying emergency department. The IPF PPS methodology includes a payment provision for interrupted stays, additional payment for outlier cases, and a per treatment payment for electroconvulsive therapy (ECT) treatments. For detailed information regarding the implementation of the IPF PPS, we refer readers to the FY 2005 IPF PPS final rule published in the Federal Register on November 15, 2004 (69 FR 66922). To find additional information about the IPF PPS, we refer readers to the CMS Web site at: http://www.cms.hhs.gov/​inpatientpsychfacilpps.

Another area on which we would like to receive public comments is on physician certification/recertification that the individual would require inpatient psychiatric care in the absence of PHP services. In order for a hospital or CMHC to be paid for partial hospitalization services on behalf of a Medicare beneficiary, a physician must certify (and recertify when such services are furnished over a period of time), among other things, that the individual would require inpatient psychiatric care in the absence of such services. In addition, an individualized written plan of treatment for furnishing such services must be established and reviewed periodically by a physician, and such services must be furnished while the individual is under the care of a physician (We refer readers to 42 CFR 424.24(e)).

Currently, the recertification requirements specify that the physician recertification must be signed by a physician who is treating the patient and has knowledge of the patient's response to treatment. The recertification is required as of the 18th day of partial hospitalization services. Subsequent recertifications are required at intervals established by the provider, but no less frequently than every 30 days. We are inviting public comments on whether the current requirement under § 424.24(e)(3)(ii) of the regulations, which requires the first recertification by the physician to be as of the 18th day of partial hospitalization services, r